UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                  ANNUAL REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

    FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999          COMMISSION FILE NUMBER
                                     0-12050

                       SAFEGUARD HEALTH ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)

                             DELAWARE     52-1528581
              (State or other jurisdiction of     (I.R.S. Employer
            incorporation or organization)     Identification Number)

                                  95 ENTERPRISE
                          ALISO VIEJO, CALIFORNIA 92656
              (Address of principal executive offices)  (Zip Code)

                                  949.425.4300
              (Registrant's telephone number, including area code)
                                  949.425.4586
            (Registrant's fax telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          COMMON STOCK, $0.01 PAR VALUE

                                      NONE
                       (Name of exchange on which listed)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.

                                YES [X]  NO [ ]

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [X]

The  aggregate  market  value  of the voting stock held by non-affiliates of the
registrant  as  of  March  15,  2000,  was  $5,033,804.

The  number  of  shares of the registrant's common stock outstanding as of March
31,  2000,  was  4,747,498  (not  including  3,247,788 shares held in treasury).


<PAGE>
<TABLE>
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                            SAFEGUARD HEALTH ENTERPRISES, INC.
                              1999 ANNUAL REPORT ON FORM 10-K

                                     TABLE OF CONTENTS


                                                                                  Page
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<S>               <C>                                                              <C>
PART I                                                                               1
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     ITEM  1.     BUSINESS                                                           1
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     ITEM  2.     PROPERTIES                                                        18
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     ITEM  3.     LEGAL  PROCEEDINGS                                                18
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     ITEM  4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               18
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PART  II                                                                            19
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     ITEM  5.     MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
     --------     ----------------------------------------------------
                  STOCKHOLDER MATTERS                                               19
                  ------------------
     ITEM  6.     SELECTED  FINANCIAL  DATA                                         20
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     ITEM  7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     --------     -------------------------------------------------
                  CONDITION AND RESULTS  OF  OPERATIONS                             21
                  ------------------------------------
     ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK        26
     --------     ----------------------------------------------------------
     ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA                   26
     --------     -----------------------------------------------
     ITEM  9.     CHANGES  IN  AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS
     --------     -----------------------------------------------------------
                  ON ACCOUNTING AND  FINANCIAL  DISCLOSURE                          26
                  ---------------------------------------

PART  III                                                                           26
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     ITEM  10.     DIRECTORS  AND/OR  EXECUTIVE  OFFICERS  OF  THE  COMPANY         26
     ---------     --------------------------------------------------------
     ITEM  11.     EXECUTIVE  COMPENSATION                                          30
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     ITEM  12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   30
     ---------     --------------------------------------------------------------

     ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS               33
     ---------     --------------------------------------------------

PART  IV                                                                            33
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ITEM  14.     EXHIBITS,  FINANCIAL  STATEMENT SCHEDULES AND REPORTS ON FORM 8-K     33
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SIGNATURES                                                                          34
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</TABLE>


                                      (i)
<PAGE>
                                     PART I

ITEM  1.  BUSINESS
-------------------

In  addition  to  historical  information,  the  description  of  business below
includes  certain  forward-looking  statements  regarding  SafeGuard  Health
Enterprises,  Inc.  (the  "Company"),  including  statements about growth plans,
business  strategies,  future  operating  results  and  financial  position, and
general  economic  and market events and trends. The Company's actual results of
operations for future periods could differ materially from the results indicated
in  the  forward-looking statements as a result of various events that cannot be
predicted  at  this  time.  Those  possible  events  include  an  increase  in
competition,  changes  in  health  care  regulations, an increase in dental care
utilization rates, new technologies, an increase in the cost of dental care, the
inability  to  efficiently  integrate the operations of acquired businesses, the
inability  to  realize  the  carrying  value  of  certain  assets  of dental and
orthodontic  practices,  the  inability  to  collect  payments due under certain
long-term promissory notes, the inability to obtain waivers and/or maturity date
extensions  from  lenders,  the inability to obtain regulatory approvals for the
conversions  of  debt  to  equity  that  were  contemplated  in  the transaction
completed on March 1, 2000, and other risks and uncertainties as described below
under  "RISK  FACTORS."  The  following  should  be read in conjunction with the
Consolidated  Financial  Statements  of  the  Company  and  Notes  thereto.

(A)  GENERAL  DEVELOPMENT  OF  BUSINESS

The  Company,  a  Delaware  corporation,  provides  managed  care  dental plans,
indemnity  dental  plans,  vision  benefit  plans,  administrative services, and
preferred  provider  organization  services.  The  Company conducts its business
through  several  subsidiaries,  one  of  which  is an insurance company that is
licensed  in  several states, and several of which are managed dental care plans
that  are  each  licensed  in  the  state  in  which  it operates. The Company's
operations  are  primarily in California, Colorado, Florida, Missouri and Texas,
but  it  also  operates  in  several  other  states.

The  Company's  predecessor,  SafeGuard  Health  Plans,  Inc.,  a  California
corporation, (the "California Plan") commenced operations in 1974 as a nonprofit
corporation. The California Plan converted to for-profit status in December 1982
and  is  currently  a subsidiary of the Company. The Company was incorporated in
California  in  November 1982 and acquired the California Plan in December 1982.
In  August  1987  the  Company  reincorporated  in  Delaware. Unless the context
requires  otherwise,  all  references  to  the  "Company"  or  "SafeGuard"  mean
SafeGuard  Health  Enterprises,  Inc.  and  its  subsidiaries.

The  Company  completed  four  acquisitions during the past several years, which
account  for  a  significant  portion  of  the  Company's current operations. In
September  1992,  the  Company  acquired a California life insurance company and
used  this  entity to begin offering indemnity dental plans to its customers. In
August  1996,  the  Company  acquired  a  managed dental care company located in
Texas,  which had approximately $12 million of annual revenue at the time of the
acquisition.  In  May  1997,  the Company acquired a managed dental care company
located  in Florida, which had approximately $7 million of annual revenue at the
time  of the acquisition. In August 1997, the Company acquired another insurance
company,  which  had  no  active  business but was licensed in several states in
which  the  Company  was  not  previously  licensed.

In  October  1996  the  Company  implemented a strategic plan to sell all of the
general  dental  practices  owned  by  the  Company.  Four of the general dental
practices  were  sold  during 1996, and the remaining practices were sold during
the  first nine months of 1997. All of the practices were sold for consideration
that  consisted  of long-term promissory notes. In September 1997 several of the
general  dental  practices  were sold to a single purchaser (the "Purchaser") in
exchange  for  $8.0  million  of  long-term  promissory notes. In April 1998 the
Company  also sold all of its orthodontic practices to the Purchaser in exchange
for  $15.0  million of long-term promissory notes. During 1997 and 1998, four of
the  general  dental  practices  that  were  sold  to  other  entities were also
transferred  to  the  Purchaser by those entities, in exchange for assumption of
the  related  promissory notes by the Purchaser. At the time of these transfers,
the  total  outstanding principal balance under the related promissory notes was
$1.9 million. During 1997 and 1998 the Company loaned a total of $1.6 million to
the  Purchaser,  which  was used by the Purchaser for working capital purposes.

Due  to  uncertainty about the Purchaser's ability to meet its commitments under
the  above-described  promissory notes from sources other than the operations of
the  discontinued  dental and orthodontic practices, the Company has not treated
the  sale  transactions  with  the  Purchaser  as sales for accounting purposes.
Accordingly,  the  related  promissory  notes are not reflected in the Company's
consolidated  financial  statements.  Instead,  the  historical  cost of the net
assets  of  the  related  dental  and  orthodontic practices, less the amount of
payments  received  from  the  Purchaser, are reflected on the Company's balance
sheet  under  the  caption  "Assets of discontinued operations transferred under
contractual arrangements." The carrying value of the promissory notes related to
the  dental practices that were transferred to the Purchaser by other purchasers
was  reduced  to  the  historical  cost  of the net assets of the related dental
practices.  The  historical  cost  of  these net assets is also reflected on the
Company's  balance  sheet  under  the caption "Assets of discontinued operations
transferred  under  contractual  arrangements."  The  working capital loans were
fully  reserved  at  the  time  the  loans  were  made  by  the  Company.


                                      -1-
<PAGE>
During  1999,  the  Company  reached  an  oral  agreement with the Purchaser and
another  third party (the "New Purchaser"), under which all the promissory notes
issued to the Company by the Purchaser (the "Notes") would be liquidated.  Under
this  agreement, the Purchaser would convey the dental and orthodontic practices
that comprise the collateral for the Notes to the New Purchaser, in exchange for
proceeds  that would be paid to the Company in satisfaction of the Notes.  Based
on this agreement, the Company recorded a $6.5 million charge to earnings during
the  nine  months  ended September 30, 1999, to reduce the carrying value of the
net  assets  of  the related dental and orthodontic practices to their estimated
net  realizable value.  During March 2000, the Company entered into a definitive
agreement  with  respect  to  this  transaction,  which  is  currently  pending
regulatory  approval.

The  Company's  executive  offices  are  located  at 95 Enterprise, Aliso Viejo,
California  92656.  Its  telephone  number is 949.425.4300 and its fax number is
949.425.4586.

DENTAL  CARE  MARKETPLACE

According  to  the United States Office of National Health Statistics, the total
expenditures  for  dental  care in the United States grew from approximately $14
billion  in  1980  to an estimated $48 billion in 1996. The United States Health
Care  Financing  Administration  reports  that  expenditures for dental services
account  for  approximately  5%  of  total  national  health  care expenditures.
According  to  the United States Department of Labor ("DOL"), the cost of dental
services  has  been  rising  at  a rate higher than that for consumer goods as a
whole.  The DOL statistics show that from 1982 to 1998, the consumer price index
for  dental  services for all urban consumers increased by 136%, while the index
for all items increased by 63%. As a result, the Company believes there has been
an  increase in employers' interest in effectively managing dental care costs.

Employer-sponsored dental benefits are one of the most common employee benefits.
The  National  Association of Dental Plans ("NADP") estimates that approximately
147  million  people, or approximately 55% of the total population of the United
States, were covered by some type of dental benefit plan at the end of 1997. The
NADP  estimates that enrollment in managed dental care plans ("dental HMOs") has
grown  from 18 million covered lives in 1994 to approximately 26 million covered
lives  at  the  end of 1997. This compares to over 50 million Americans who were
enrolled  in  medical HMOs in 1997, according to the Group Health Association of
America.  The  Company  believes that the relatively high growth rate for dental
HMOs  is  attributable  to  greater  acceptance of managed care by employers and
employees,  a  significant  price  advantage  over  traditional indemnity dental
insurance plans, and greater acceptance of dental HMOs by dentists, resulting in
improved  accessibility and convenience for members. At the end of 1997, members
of dental HMOs represented approximately 18% of the total population with dental
coverage,  and  approximately  10%  of  the  total  United  States  population.

According  to the 1995 Foster Higgins Survey of Employee Sponsored Health Plans,
approximately  89%  of employers with more than 500 employees offer some type of
dental  coverage  to employees, and approximately 79% of these employers offer a
stand-alone dental plan that is separate from other health care coverage offered
to employees. This survey also reported that only approximately 54% of employers
with less than 500 employees offer dental coverage to their employees. About 62%
of  all  employers who offer dental coverage offer stand-alone dental plans. The
Company  believes that many employers in the small to mid-size range that do not
offer  dental  benefits  would  be  willing  to  offering a cost-effective plan,
particularly  if  the  employee  pays  a portion of the cost of the plan through
payroll  deductions.

The  dental  HMO  industry  is  characterized by participation of several large,
national  insurance  companies  and  numerous  independent  organizations. As of
December  31,  1996,  the  NADP  estimated  that  there were over 150 dental HMO
companies  in  the  United  States,  with  no  dominant  market  leader.

During  the  last  two  decades,  the  increase in the number of dentists in the
United  States  has  exceeded  the  general  population growth. According to the
American  Dental  Association  ("ADA"),  the  number  of practicing dentists per
100,000  individuals in the United States has increased from 53 in 1980 to 60 in
1991.  In  addition,  the  dental  care  industry  is  highly  fragmented  with
approximately  96%  of  all  practicing dentists working in a one or two-dentist
office,  according  to  the  ADA.  According  to  a  survey  of dental practices
published by Dental Economics in 1994, the median amount of employee payroll and
other  overhead  expenses  incurred  by  solo  and  group  dental  practices was
approximately  60%  of  gross revenue. The significant increase in the number of
dentists  per  capita,  the  highly  fragmented  dental  care industry, the high
proportion  of  overhead  costs  for  dentists, and an improved level of overall
dental health in the United States, has created a highly competitive environment
among  dentists. The Company believes there is a significant vacancy rate in the
average  dentist's  office  in  major  metropolitan  areas.  These  factors have
contributed  to  an  increase  in  the  willingness  of  qualified  dentists  to
participate  in dental HMO and preferred provider organization networks, such as
those  maintained  by  the  Company,  as  dentists  seek  alternative methods of
increasing  practice  revenues.


                                      -2-
<PAGE>
The  average  monthly cost of dental coverage is much lower than that of medical
coverage. The utilization rate for dental services is also more predictable than
that  for  medical  services,  and  dental  coverage  generally  does  not cover
catastrophic  risks. Dental care is provided almost exclusively on an outpatient
basis,  and according to a 1990 ADA survey, general dentists perform over 81% of
all  dental services. Dental benefit plans generally do not include coverage for
hospitalization,  which  is  typically  the  most expensive component of medical
services.

Common  features  of  dental  indemnity  plans  include  deductibles  in varying
amounts,  maximum annual benefits of less than $2,000 per person and significant
patient  cost  sharing.  Patient  cost  sharing  typically varies by the type of
dental  procedure, ranging from no cost sharing for preventive procedures to 50%
cost-sharing  for  dentures  and even greater cost sharing for orthodontic care.
The  relatively  high patient cost-sharing and the relatively predictable nature
of  dental  expenditures  substantially limits the underwriting risk of a dental
plan  when  compared  to  the  underwriting  risk  of a medical plan that covers
catastrophic  illness  and injuries. Furthermore, since most dental problems are
not life threatening and do not represent serious impairments to overall health,
there  is  a higher degree of patient cost sensitivity and discretion associated
with  obtaining  dental  services.  Many  dental conditions also have a range of
appropriate  courses  of  treatment, each of which has a different out-of-pocket
cost  for  patients. For example, a deteriorated amalgam filling may be replaced
with  another  amalgam  filling  (a  low-cost alternative), a pin-retained crown
build-up  (a  more  costly  alternative), or a crown with associated periodontal
treatment  (the  most costly alternative). The level of coverage provided to the
patient  can  influence the type of services selected by the patient or rendered
by  the  dentist.

Under  a  traditional indemnity insurance plan, the insurer and the patient each
pays  a  portion of the fee charged by the dentist, depending upon the design of
the  dental  benefit  plan.  Under  such an indemnity plan, dentists have little
incentive to deliver cost-effective treatments because they are compensated on a
fee-for-service  basis.  In  contrast,  under a dental HMO plan, each dentist is
typically  reimbursed in the form of a fixed monthly payment for each member who
selects  that dentist as his or her primary dental care provider (a "capitation"
payment).  Under  a  dental  HMO  plan,  each  dentist  also  typically receives
co-payments from the patient for certain dental services that are not covered in
full  by the capitation payments. The amounts of the capitation payments and the
co-payments  are negotiated in advance by the dental HMO. The co-payment amounts
are  generally designed to mitigate the level of utilization risk assumed by the
dentist,  but  are low enough to encourage the dentist to provide cost-effective
treatments.  Fixed  capitation  payments  that do not vary with the frequency of
services provided create an incentive for dentists to emphasize preventive care,
to  control  costs  and  to  develop a long-term relationship with his patients.
Fixed capitation payments also substantially reduce the underwriting risk to the
Company  associated  with  varying  utilization  of  dental  services.

(B)  FINANCIAL  INFORMATION  ABOUT  SEGMENTS

The  Company operates in a single industry segment, the provision of dental care
benefit  plans.

(C)  NARRATIVE  DESCRIPTION  OF  BUSINESS

GENERAL  DESCRIPTION  OF  THE  COMPANY

The  Company  provides  dental  benefit  plans  to government and private sector
employers,  associations,  and  individuals.  During  the last several years the
Company  has  focused  its  marketing  efforts  on  mid-sized and small employer
groups,  typically  with  less  than  1,000 employees. The Company currently has
contracts  with  approximately 5,000 employer or association groups and provides
dental  benefits  to  approximately  900,000 covered individuals. Dental care is
provided  to  the  covered  individuals  through  a  managed  care  network  of
approximately  4,000  general  dentists  and  specialty providers, and through a
preferred  provider  network  of  approximately  9,000  dentists.

Under  the  Company's  dental HMO plans, its customers pay a monthly premium for
each  subscriber  enrolled  in  the  plan,  and  the Company usually agrees to a
monthly  rate  that is fixed for a period of one or two years. The amount of the
monthly  premium  varies depending on the dental services covered, the amount of
the  member  co-payments that are required for certain types of dental services,
and  the  number  of dependents enrolled by each subscriber. Each subscriber and
dependent  is  required  to  select a general dentist from the Company's managed
care  provider  network,  and  to  receive all general dental services from that
dentist.  Any  referral to a specialist must be requested by the general dentist
and  approved  in advance by the Company, in order for the related service to be
covered  under  the  dental  HMO  plan.  Under dental HMO plans, subscribers and
dependents  are not required to pay deductibles or file claim forms, and are not
subject  to  a  maximum  annual  benefit.

Under  the  Company's  indemnity  dental plans, its customers also pay a monthly
premium for each subscriber enrolled in the plan, and the Company usually agrees
to  a monthly rate that is fixed for a period of one or two years. The amount of
the  monthly premium varies depending on the dental services covered, the amount


                                      -3-
<PAGE>
of  the  annual  deductible,  the portion of the cost of dental services that is
paid  by the subscriber or dependent, the maximum annual benefit amount, and the
number  of dependents enrolled by each subscriber. Under indemnity dental plans,
subscribers  are  required to pay deductibles and co-payments that are typically
higher  than  the  co-payments  required under a dental HMO plan. However, under
indemnity  dental plans, subscribers and dependents can choose to receive dental
services  from  any  dentist  of  their  choice.

The  Company's  goal  is to be a leading dental benefits provider in each of the
geographic  markets in which it operates. The Company's business is primarily in
California,  Colorado,  Florida, Missouri and Texas, but it also provides dental
HNO plans and indemnity dental plans in several other states. The Company offers
a comprehensive range of dental benefit plans that is based on a set of standard
plan  designs  that  are  available  in each of the markets in which the Company
operates. By standardizing the dental plans offered, the Company believes it can
deliver  a  consistent  product and a high level of customer service through the
consistent  application  of  policies  and  procedures,  and  by  streamlining
administrative  functions.  The standardized plans also allow employers to offer
substantially  the  same benefits in all states in which the Company is licensed
to  operate.  However,  the  Company also has the information technology and the
flexibility  to  deliver  highly  customized benefit plans, which are frequently
requested  by  large  employer  groups.

The Company uses multiple distribution methods to sell its products. The Company
has  an  internal sales force that primarily works with independent brokers, and
to  a  lesser extent, directly with small and mid-sized employer groups, to sell
the Company's benefit plans. The Company also works directly with large benefits
consulting  firms,  who  are  often  engaged  by  large  employers  to assist in
selecting  the  best  dental benefit plans for those employers. The Company also
offers  its  dental  plans to medical HMOs, which in turn, include the Company's
dental  plans  in comprehensive medical plans offered by those medical HMOs. The
Company  utilizes  general  agency  relationships  in  certain  markets,  which
generally  target  small  employers  and  individuals.

The Company is committed to providing quality dental care to its members through
a  network of qualified, accessible dentists. By providing both dental HMO plans
and  indemnity  dental  plans,  the  Company  is  able to maintain a competitive
network  of  providers  by  delivering  patients to dentists under both types of
provider  reimbursement.  In  addition,  the  Company  also  offers  stand-alone
administrative  services  and preferred provider organization access products to
its  customers,  which  deliver  additional  patient  volume  to  its contracted
providers.  The  Company has provider relations representatives who maintain the
relationships  with  the  network providers in each of the Company's significant
geographic  markets.  The local knowledge and expertise of these representatives
enables the Company to develop competitive provider networks that are convenient
for  plan  members,  which  is  an  important factor to employers in selecting a
dental  HMO  plan.

PRODUCTS

The  Company  operates  in  a single business segment, which is the provision of
dental  benefit plans to employer groups, certain associations, and individuals.
The  Company  provides  a broad range of plan designs, depending on the needs of
its  customers.  In addition to offering a range of benefit designs, the Company
can  offer  benefit  plans  with  a  restricted choice of providers, through its
managed  care  plans, or benefit plans with a wider choice of providers, through
its  indemnity  dental  plans. Premium rates are adjusted to reflect the benefit
design,  and whether the covered individuals can select any provider at the time
of  service.

Dental  HMO  Plans. The Company offers a comprehensive range of dental HMO plans
under  the  names  SafeGuard  Health  Plans  and SafeGuard Dental Plans. Under a
dental  HMO  plan,  as noted above, each subscriber and dependent is required to
select  a  general dentist from the Company's managed care provider network, and
to  receive  all  general  dental  services from that dentist. Any referral to a
specialist  must  be requested by the general dentist and approved in advance by
the Company, in order for the related service to be covered under the dental HMO
plan.  The  general dentist selected by the member receives a monthly capitation
payment  from  the Company, which is designed to cover most of the total cost of
the  dental  services  delivered  to that member. The monthly capitation payment
does  not  vary with the nature or the extent of dental services provided to the
member,  but  is variable based on the particular benefit plan purchased by each
member.  In  exchange for the monthly capitation payments, the selected provider
is obligated to provide specific dental services to plan members, as required by
the  members.  In  addition  to  the  capitation payments, the provider receives
co-payments  from  the  members  for  certain  types  of  services, and receives
supplemental  payments  from  the  Company for certain types of services. When a
member  requires  the services of a specialist, the Company pays the cost of the
specialty  services  on a negotiated fee schedule basis, and to a lesser extent,
on  a  discounted  fee-for-service  basis.

Members  covered  under the Company's dental HMO plans are typically entitled to
receive certain basic dental procedures, such as examinations, x-rays, cleanings
and  fillings,  at  no additional charge, other than, in some cases, a small per
office  visit  co-payment.  The member co-payments required for more complicated
procedures provided by the primary care dentist, such as root canals and crowns,
vary  based  on  the complexity of the service and benefit plan purchased by the
member.  Most  of the Company's dental HMO plans also cover services provided by
specialists  in Company's provider network, including oral surgery, endodontics,
periodontics,  orthodontics,  and pedodontics. Any referral to a specialist must
be  requested  by the general dentist and approved in advance by the Company, in


                                      -4-
<PAGE>
order  for  the  related  service  to be covered under the dental HMO plan.  The
Company's  dental HMO plans also cover emergency out-of-area treatments that are
required  when  a  member  is temporarily outside the area served by his general
dentist.

Indemnity  Dental  Plans.  The Company offers a comprehensive range of indemnity
dental  plans  in  each  of  the  geographic markets in which it operates. Under
indemnity  dental  plans,  subscribers  are  required  to  pay  deductibles  and
co-payments  that  are  typically  higher  than the co-payments required under a
dental HMO plan. Also, indemnity dental plans typically include a maximum annual
benefit,  which  is  not typically included in a dental HMO plan. However, under
indemnity  dental plans, subscribers and dependents can choose to receive dental
services  from  any  dentist of their choice. Indemnity dental plans subject the
Company  to  more  significant  underwriting risks than dental HMO plans, due to
varying  utilization  rates  of  dental  services.

Dual  Option  Products.  The  Company  offers  a  "dual  option"  product to its
customers,  which  includes both a dental HMO plan and an indemnity dental plan.
As  a  result, each individual subscriber can choose whether to enroll in either
type  of  dental  plan. By offering a dual option product, the Company can offer
its  customers  more  flexibility, and can capture a larger portion of the total
dental  benefits expenditures by each of its customers. This product also allows
the  Company  to  offer indemnity coverage to employees of its customers who are
located  outside the geographic area served by the Company's dental HMO provider
network.  Certain  states,  such as Nevada and Oklahoma, require that dental HMO
plans  be  offered only as part of a dual option product and other states may do
so  in the future. Dual option products are particularly attractive to customers
located  in  areas  where  the  Company's  dental  HMO  provider network is less
competitive and employees value the ability to receive services from the dentist
of  their choice. The Company believes that offering dual option products to its
customers provides an opportunity to increase enrollment in its dental HMO plans
over  time.

Preferred  Provider  Organizations. The Company's indemnity dental plans include
for  an  increased  level  of  benefits in the event a member utilizes a dentist
participating  in  its  preferred  provider organization ("PPO") network. When a
subscriber  receives  services  from  a  PPO dentist, the co-payment required is
substantially  reduced,  and  annual  deductible amounts are typically waived or
reduced.  The dentists in the PPO network have agreed to provide dental benefits
to  customers  of  the  Company  for  a  fee that is typically 30% less than the
dentist's  usual  and  customary  fee.  The  Company  believes  that offering an
indemnity  dental  plan  with  a  PPO  network  is  an  attractive  way to enter
geographic  areas  where  few  dentists have agreed to participate in dental HMO
plans.  In  such  areas,  participation  in  the  PPO  network  can  serve  as a
transitional  step  for dentists, between the traditional fee-for-service system
of  reimbursement  to  participation  in  a  dental  HMO  network.

Other  Dental  Benefits Products. For self-insured employers, the Company offers
claims  administration  under  an  administrative  services organization ("ASO")
arrangement,  under  which the Company does not assume the underwriting risk for
the  benefits  provided.  The  Company receives an administrative fee to process
claims  and  the  underwriting  risk  is retained by the employer sponsoring the
self-insured  plan.  The  Company  also provides access to its PPO network for a
fixed  monthly  fee  based  on  the  number of potential patients covered by the
product.  Under  this  product, the providers in the PPO network offer a reduced
fee  schedule for services provided to participating patients. The Company makes
no  payments  to  the  providers  in  the PPO under this product. Currently, the
annual  revenue  from  ASO  arrangements  and PPO network access products is not
material.

Vision  Benefit  Plans.  The  Company  offers  a vision benefit plan to employer
groups,  which  covers routine eye care in exchange for a fixed monthly premium.
Under the vision plan, subscribers can typically choose to receive services from
any  provider in the network in exchange for co-payments that vary with the type
of  service received. Currently, the annual revenue from vision benefit plans is
not  material.

PROVIDER  RELATIONS

The  Company  believes  that  a key element in its enrollment growth is a stable
panel  of  quality  focused  dentists  in convenient locations. The Company also
requires  that  all  dental  HMO  and  PPO  providers  meet  all  of its quality
assessment  program standards. The program includes current professional license
verification,  current  liability insurance, and a risk management review of the
dental  facility to ensure that all OSHA and regulatory requirements are met, an
inspection  of  the  office's  sterilization  practices,  and  a  review  of the
facilities  location,  including  parking  availability and handicap access. See
"QUALITY  MANAGEMENT  AND  IMPROVEMENT."

The  Company  believes that dental providers on the Company's Dental HMO and PPO
panels  are  willing to provide their services at a lower capitated (fixed) rate
per  month  in  exchange  for  the relatively steady, extended stream of revenue
generated  by  panel participation. Furthermore, this contractual revenue source
for  the  provider is free from the collection problems and administrative costs
sometimes  associated  with  other  forms  of  dental  coverage. Thus, qualified
dentists  and/or  dental  groups  have  generally  been available and willing to
participate  on  the  Company's  panels  and  supplement  their  fee-for-service
practice.

The  Company  compensates  each panel dental office on its Dental HMO plans on a
monthly  capitation  rate for each member who selects that office, regardless of
the  amount  or  character  of service provided during the month. The capitation
rate does not vary with the nature or extent of services utilized, however it is


                                      -5-
<PAGE>
variable  based upon plan design. The total amount paid to each dental office is
determined  by  the capitation rate per each client contract applicable thereto,
and  the  number  of eligible members served by the participating dental office.
The  Company  provides  additional  compensation to its Dental HMO providers for
specified dental procedures. The Company believes that this compensation program
provides  for  a  higher  level  of  member  and  provider  satisfaction through
increased compensation to the provider. For dentists who provide services to the
Company's  insured  members,  compensation  is  based  upon  a percentage of the
provider's  usual  and customary fee based upon established tables of allowances
utilized  by  the  Company in its claims paying processing systems. Benefits are
provided  in  accordance with percentages that are established for each member's
benefit  program.  Providers  who  participate  in the Company's PPO program are
compensated  at a fee which is less than the provider's usual and customary fee,
usually  at  a  discount of up to 30 percent, or 30 percent off of the Company's
usual  and  customary  fee  for  the  area,  whichever  is  less.

The  Company  currently employs provider relations representatives in each local
office.  All  have  extensive  dental  office  management backgrounds and act as
consultants to assist our panel providers with the administration of the plan in
the  day-to-day operation of their offices. Should a dental office terminate its
contract  with  the  Company, if necessary a new provider will be recruited in a
timely  manner  to meet the needs of the members assigned to that office, and so
there  will  be  no  delay  in  the  member's  care. No individual dental office
provided  service  to  more than 10 percent of the Company's members at December
31,  1999.

The  Company's panel dental offices are free to contract with other dental plans
and  both  they  and  the Company can terminate the contract at any time upon 60
days prior written notice. In accordance with the contract, the Company may also
terminate  the  contract  "for  cause"  upon  15  days prior written notice. The
Company  may  also, at anytime, change the terms, rates, benefits and conditions
of  the various plans serviced by its providers with ten (10) days notice to the
provider.  The  Company's  contracts  with  panel dental offices require them to
maintain  their  own  professional liability insurance for a minimum of $200,000
per  claim,  and  $600,000 per annual aggregate and to indemnify the Company for
claims  arising  from  the  dentist's  acts  or  omissions.

At  December  31,  1999,  approximately  4,000  primary  care and specialty care
dentists  were  participating panel providers on the Company's Dental HMO plans.
General  dentists are required to render all basic dental care and refer members
to specialists only as required. Under its policy, the Company offers nearly all
specialty  dental  services,  including oral surgery, endodontics, periodontics,
orthodontics,  and  pediatric  dentistry. If the specialty care falls within the
Company's  guidelines, all or a substantial portion of the specialists' fees are
paid  by  the  Company.  At  December  31,  1999,  the  Company  contracted with
approximately  9,000  primary  care and specialty care dentists on the Company's
PPO  panel.

MANAGEMENT  INFORMATION  SYSTEMS

During  1999,  the  Company  continued  to  enhance  its  proprietary management
information  system  to  better manage its operational resources and analysis of
data.  These  changes  focused  on  reporting  mechanisms  to  track  regulatory
compliance and data interface with clients. The Company's goal is to continue to
enhance  technologies  to  better  equip the Company to compete while ultimately
reducing  the  Company's administrative expenses. The Company also continued its
development  of  various  operating  systems  based  upon  software  source code
purchased in 1996 for its business operations system, which are being adapted to
the  specific needs of the Company. This software allows the Company to develop,
in-house,  a  system that is used to expand the Company's management information
system to all Company regional offices. This system takes advantage of the power
of  personal  computers  in the workplace. The system provides a much easier and
more  efficient interface using Windows-based screens. Individual users are able
to quickly customize data queries for their specific needs with results directed
to  the screen, printer or downloaded into a word processor and/or spreadsheet.

One  component  of  the  ongoing modifications to the Company's primary business
application  is  the  enhancement  of the system that is used to manage billing,
collections,  and  accounts  receivable  activities  (the "billing" system). The
Company  made  various  modifications  to its billing system during 1999, and is
currently  making  additional  modifications,  which are designed to improve the
Company's  ability  to  manage  its billing and accounts receivable functions.

The  Company  employs  a  personal  computer network-based general ledger system
providing  reporting  and  analysis  tools  which  allows for the extraction and
download  of  data to word processors and spreadsheets for further analysis. The
Company  also  expanded  the  use  of  its  electronic  mail  system  to all its
locations.  The  Company has also upgraded its current network server systems to
handle the increased activity within the network. The Dental HMO plan, indemnity
and PPO plans, and electronic mail environments are now interconnected. With the
implementation  of these new and upgraded systems, the entire network is tightly
integrated.  These  systems  demonstrate  the  Company's  proactive  position in
automating  its computer operations and allowing it to remain competitive in the
marketplace.


                                      -6-
<PAGE>
QUALITY  MANAGEMENT  AND  IMPROVEMENT

The  Company's  commitment  to quality is supported throughout the organization.
The  Company's  Quality  Improvement  Program  includes verification of provider
credentials and an assessment of the qualifications of dentists to become and/or
remain contracted providers. It also includes quality assessment of the provider
network,  assessment  of  each  dentist's  compliance  with  Company  standards,
analysis  and  measurement  of  network and provider performance, and continuous
improvement  of  contracting  dentist  performance  through  constructive  and
continuous  feedback.

Under  the  direction of the Company, contracting dental offices undergo regular
assessments  to  determine  appropriateness  of care and treatment outcomes. The
Company  outsources  the on-site office quality assessment review as part of the
Quality  Improvement  Program.  By  utilizing  an  objective outside source, the
Company is able to maintain a significant level of independence not always found
when  employees  conduct  the  on-site assessments. The Company also maintains a
credentialing  committee  that  uses  information  provided  by  a  certified
Credentialing  Verification  Organization  ("CVO")  to  verify  the  provider's
licensing  status,  insurance,  compliance  with  applicable  federal  and state
regulations,  and  other  related  processes  with  an  objective  approach  for
consistency,  effectiveness,  and  risk  management  review.

The  Company  contracts  with an outside research firm to conduct regular member
satisfaction  surveys.  The  surveys  are  designed  to provide the Company with
valid  and  reliable  information  on  members'  satisfaction  with  dental care
services  provided,  the  provider  network  and  the  Company's plan design and
customer  service.

The  Company  maintains  an  accessibility  monitoring  program  that  tracks
appointment  availability at contracting dentist offices.   The Company conducts
quarterly  mail surveys to monitor availability for new patient, recall, routine
and  emergency  appointments,  and  to measure the waiting time in the reception
area  and  operatory  room.  The results are correlated with the findings of the
on-site quality review, member satisfaction surveys, grievances, and appointment
availability  documentation.

The  Company conducts periodic review and assessment of all quality initiatives.
The  quality  improvement process includes providing feedback to the contracting
dentists  and the Company, assisting in the development of corrective actions to
modify  deficiencies,  and verifying that corrective actions are implemented. To
accomplish this task, the Company employs a team concept, combining its Quality,
Member  Services and Provider Relations departments, to benefit both its members
and  its  contracting  dentists.

UTILIZATION  REVIEW

The  Company uses computerized analysis to monitor the categories, incidence and
frequency  of dental care services provided to members. The analysis of provider
utilization  and  cost data enables the Company and its clients to determine the
type  of  procedures  performed  by  contracted dental offices and ascertain the
savings  to  both clients and members compared to the cost of competitive dental
indemnity  insurance  coverage.  The  analyses  are  also used by the Company to
identify  unusual  patterns  of  dental care utilization or complaints which may
initiate  a  focused  or  comprehensive  office  quality  assessment  review.

The  Company is also in the process of expanding the use of its indemnity claims
processing  system  to  include  utilization  review and case management for its
indemnity  insurance  business.  As  part  of  the  expansion  of  its indemnity
business,  the  Company  is  developing  a  claims  reporting  system  that will
demonstrate  cost  savings for clients and members when contracting PPO dentists
are  utilized.  These  reports  will  compare  practice  patterns that vary from
established  norms,  identify  patient  cost  trends,  provide  detailed  claims
experience, and case and claims management information. The Company will then be
able  to  compare  utilization patterns among the dentists rendering services to
patients  insured  by the Company to determine whether such dentists are over or
under-utilizing  the  benefits  provided.  In the event that an unusual practice
pattern is ascertained, the Company will review its findings with the dentist on
a  regular  basis  to  reduce  the  potential  for  abuse.

MEMBER  SERVICES

The  Company  maintains a comprehensive Member Services and Grievance Resolution
System  designed  to  assist  members  with  simple  inquiries and resolution of
dissatisfactions. The Company consistently monitors service statistics to ensure
continued  ability  to  exceed  the members' expectations. Eighty percent of all
dissatisfactions  (grievances)  received  concerning eligibility or professional
services  are  resolved  completely  within  48  hours.  The Company makes every
attempt  to resolve more complex situations within 5 working days, but no longer
than  30  days  following  the  receipt  of  the  grievance.

The Company's Grievance Monitoring Committee provides oversight of the grievance
process  with  particular attention paid to emerging patterns and trends, nature
and  volume  of  complaints,  financial  implication  for  the  disposition  of
complaints,  and  quality  of  care  issues.  The monitoring process is enhanced


                                      -7-
<PAGE>
through  the involvement of the Quality Management and Public Policy Committees.
The  Quality  Management  Committee,  at  quarterly  scheduled meetings, reviews
grievances  at  the provider level and has the responsibility to make corrective
action  recommendations to the Company's Board of Directors based upon grievance
volume,  trends  and/or  patterns.  The  Public  Policy  Committee, at quarterly
scheduled  meetings,  reviews grievances based on volume and type of complaints,
emergent patterns and trends, and has the responsibility to make administrative,
policy  or plan change recommendations to the Company's Board of Directors. Both
committees  also  review  specific  complaints  that have exhausted the standard
grievance  resolution  process.  All grievances receive a written disposition of
the  resolution  within  30  days  of  receipt  of  the grievance. The Company's
arbitration  policy  is designed as a final resort for members or providers that
are  dissatisfied  with the results of the appeals, Quality Management or Public
Policy  processes. Arbitration may not be initiated until the grievance, Quality
Management,  or  Public Policy processes have been exhausted. The arbitration is
conducted  according  to  the  American  Arbitration  Association  rules  and
regulations.

The  Company utilizes an automated call distribution ("ACD") system for customer
call  management. The Company provides toll-free customer telephone service with
automated  24-hours  per day, 7 days per week access. Automated service features
are  available  for  simple  inquires such as provider selection, identification
card  requests, and eligibility verification. The Company also provides customer
service  telephone  support  during  regularly  scheduled  business  hours.  The
Company's  call  volume  averages  45,000 calls per month, with approximately 30
percent  handled  via  automated  selection  features.  The  ACD  system has the
capability  to  prioritize  customer calls, and provide service update standards
per guidelines reports on a predetermined basis. The Company strives to maintain
a  predetermined  service  standard  of  answering  all  customer calls within a
specified  time  period,  with  an  acceptable  abandonment  rate.

RISK  MANAGEMENT

The Company has sufficient general and professional liability insurance coverage
to  manage  the  ordinary exposure of operating its Dental HMO plan business and
its  indemnity  dental  plans.  Generally,  the  Company  is indemnified against
professional  liability  claims  by  its  independently contracted providers. In
addition,  each dentist is required to maintain professional liability insurance
with  specified  minimums  of  coverage.  The Company also maintains arbitration
provisions  in  its  contracts  with  providers.

Considering  the  Company's  exposure  to  future  claims for failure to provide
coverage in addition to the secondary risk to professional liability claims, the
Company  carries its own professional liability insurance coverage in the amount
of  $10,000,000, which it views as being adequate. However, no guarantee is made
that sufficient general and/or professional liability insurance coverage will be
available  to  the  Company  at  an  acceptable  cost.

CLIENTS  AND  CONTRACTS

Substantially  all  of  the  Company's  900,000  members  at  December 31, 1999,
participate  through over 5,000 group plans paid for by governmental and private
sector employers, multiple-employer trusts and educational institutions or, to a
lesser  extent,  through individual plans. Significant clients served in 1999 by
the Company include the City of Dallas, City of Los Angeles, Southern California
Edison,  County  of  Los  Angeles,  Dallas  Independent School District, several
contracts  with  Boeing  Corporation,  Southern  California Gas Company, and the
Joint  Council  #42 Welfare Trust. In the opinion of management, the loss of any
single  client  would  not  have  a  material  adverse  effect  on the Company's
financial  condition  or  results  of  operations.

The  Company  takes  a  proactive  approach  to  better  service its clients and
members.  The  Company  maintains  a  multi-faceted plan to address the specific
needs  of  its  clients  by  assigning  a  client services representative to all
clients.  Each  client  services  representative  has  dental  care  and  field
experience.  The  Company's  customer  service  complaint  system  also has been
enhanced  by  the  Company's computer network which provides each representative
with  full access to client, member and provider records. The Company's provider
network  also  benefits  its  multi-state  clients.

Given  the  increasingly competitive nature of the dental care market, it is not
unusual for the Company to obtain a new client from competing indemnity insurers
or  other dental HMO plans, or to lose an existing client to others. The Company
is  also  sensitive  to  the  requirement  that  there  be  adequate  levels  of
compensation  to its panel of participating providers so as to ensure that there
is  an  adequate  panel of providers from which the client's members may select.
See  "MARKETING"  and  "COMPETITION."

The  Company's  contracts generally provide for a defined dental benefit program
to  be  delivered  to  plan  members for a period of one to two years at a fixed
monthly  per-capita  rate to the client. The contracts normally allow the client
the right to terminate on 60 days written notice of a deficiency in performance;
the Company has the right to extend the 60-day period to correct the deficiency.


                                      -8-
<PAGE>
ACQUISITIONS

In  1996,  the  Company  completed  the  acquisition  of  First  American Dental
Benefits,  Inc. ("First American"), a privately held managed dental care company
based  in Dallas, Texas, for total consideration of approximately $23.6 million.
The purchase price included $20 million paid at closing and an aggregate of $3.6
million  paid  over  three years pursuant to non-competition agreements with the
former owners of First American. First American had approximately $10 million of
annual revenue at the time of the acquisition. The acquisition of First American
was  recorded  using  the  purchase  method  of  accounting,  and its results of
operations  are  included in the Company's financial statements beginning on the
date  of  acquisition.  First  American  was  merged  with  the  Company's Texas
subsidiary  effective  in  August  1999.

In  May  1997  the  Company  completed  the  acquisition  of  Advantage  Dental
HealthPlans ("Advantage"), a privately held managed dental care company based in
Fort  Lauderdale,  Florida,  for  total  consideration  of  approximately  $10.0
million. The purchase price included $8.5 million paid at closing in the form of
a  note  payable  to  the  seller and an aggregate of $1.5 million paid over two
years  pursuant  to  a  non-competition  agreement  with  the  former  owner  of
Advantage.  Advantage had approximately $7 million of annual revenue at the time
of the acquisition. The acquisition of Advantage was recorded using the purchase
method  of  accounting,  and  its  results  of  operations  are  included in the
Company's  financial  statements  beginning  on  the  date  of  acquisition.

In August 1997 the Company completed the acquisition of Consumers Life Insurance
Company  of  North  Carolina  ("Consumers"),  a  privately held dental insurance
company  with  licenses  in  sixteen  states,  for  total  consideration  of
approximately $3.2 million. Consumers had no significant business at the time of
the  acquisition, but it was licensed in several states in which the Company was
not  previously  licensed  to  offer indemnity dental plans. The acquisition was
recorded  based  on  the  purchase  method  of  accounting, and accordingly, the
results  of  operations  of Consumers are included in the accompanying financial
statements  beginning  on  the  date  of  the  acquisition.

MARKETING

In  the past, the Company's primary marketing strategy has been to contract with
large  employer  groups.  While this strategy has served the Company well in the
past,  several  years  ago the Company broadened its market strategy to seek out
and  contract  with employers with between 100 and 1,000 employees. While in the
past,  the  Company's  Dental HMO plan had been offered as an alternative to the
primary dental insurance included in the employer's health care benefit program,
with  the  acquisition  of  the  Company's  indemnity  insurance subsidiary, the
Company is now able to contract with the employer to provide both the Dental HMO
plan  and  the  indemnity  dental insurance program through one relationship. By
targeting  the  smaller  and  mid-sized  employer groups described above, and by
offering  both the Dental HMO and indemnity dental products to the employer, the
Company  is  able  to  obtain  a  higher per member per month rate than it could
previously by only offering its Dental HMO plan. Before submitting a proposal to
a prospective employer-client, the Company analyzes a demographic profile of the
potential  new  plan  members,  the  current  and desired dental benefit levels,
availability of adequate provider coverage and timely access, and other factors.


The  Company  markets  its dental benefit plans through a network of independent
insurance  agents  and  brokers  and  an employee sales force. This distribution
system  is  designed  to reach group purchasers of all sizes in an efficient and
cost effective manner. The Company believes that its marketing strategy provides
it  with  a  competitive  advantage by enabling it to market to a wider range of
potential  groups  more  effectively  than  companies  relying  upon  a  single
distribution  system.  The  Company's  sales force targets employers and groups,
which  are  more  likely  to  contribute towards the cost of dental benefits for
their  employees. In marketing to such groups, the Company's sales force focuses
on  selling  both  the Dental HMO plan and an indemnity/PPO product. The Company
pays  its sales force through a combination of salary and incentive compensation
based  upon  the  number  of  members  enrolled  for  new  groups.

The Company's independent insurance agent and broker network focuses on offering
Dental  HMO  and  indemnity/PPO  products  to medium and smaller sized employers
which  may  or may not contribute towards or offer dental benefit plans to their
employees. The Company believes that there are significant opportunities for the
Company  to expand Dental HMO and indemnity coverage to medium and smaller sized
employers  by  expanding  its network of independent brokers who can effectively
sell dental benefit programs to the medium and smaller sized market. Brokers and
agents typically do not market the Company's dental plans on an exclusive basis.
Brokers  and  agents generally receive a flat percentage of premium collected as
commission  for  the  initial  sale  and  for each renewal thereafter. Brokerage
commissions  paid  by  the  Company  were 7.0 percent and 6.3 percent of premium
revenues  for  1999  and  1998,  respectively.

Once  plan  participation  is  to  be made available to employees, the Company's
marketing  efforts  shift  to  the  potential  plan members. During a designated
annual open enrollment period, participants may elect the Company's dental plans
or  opt for the other form(s) of dental benefits being offered, generally dental
indemnity insurance, either offered by the Company or another insurance carrier.


                                      -9-
<PAGE>
Generally,  participating employees can enroll into or drop out of the Company's
plans  only during this enrollment period. Management believes that with most of
its  group  clients,  an  average  of  approximately 10 percent to 15 percent of
eligible  employees  select  the Company's Dental HMO plan during the first open
enrollment period in which it is offered and that with smaller group clients, an
average  of  approximately  20 percent with voluntary plans select the Company's
Dental  HMO  plan,  and  an  average  of  approximately  30  percent of eligible
employees  with  employer paid plans select the Company's Dental HMO plan during
the  first  open  enrollment  period  in  which  it  is  offered.

In  the  situation  where  the Company is successful in selling its multi-choice
products  to  the  employer,  all  employees  are  enrolled in one of the plan's
offered  by  the  Company.  The  Company  believes  that  the ability to offer a
multi-choice  option program increases the amount of revenue generated from each
sale  by  providing  the employer with the entire insurance program which may be
available  to  its  employees. This has the effect of increasing the overall per
member  per  month  rate  paid  by  the employer for each employee since the per
member  per  month  premium  for  the  Company's  indemnity  dental  program  is
significantly  higher  than  that  which  the Company charges for its Dental HMO
plans. This has the overall effect of increasing the revenue generated from each
dollar  of  expense  associated  with  the  selling  of the Company's products.

The  Company  provides  a  vision  plan  known  as Premier Vision Care Plan (the
"Premier  Plan").  The  Company developed the Premier Plan with the intention of
enhancing  the  vision  care component of its benefit programs. The Premier Plan
also  features  a  convenient open provider option that allows members to select
any optometrist under contract with the Company at the time they seek care. This
open  panel  option  is  underwritten  by  the  Company's  indemnity  insurance
subsidiary  in  California.  The  entire  Premier  Plan  is underwritten by this
subsidiary in all other states in which it is provided. No provider preselection
is  required.  There  are  no cards to mail or forms to present before receiving
care so members can enjoy immediate access. The Premier Plan also allows members
to  obtain  services from any vision care professional and receive reimbursement
from  the  Company  according  to  a  set  schedule  of  benefits.

Smaller  group  employers  find  especially  attractive the Company's ability to
offer one-stop shopping with its multi-choice dental package of indemnity dental
insurance and dental HMO plans, and its vision plans. The Company also maintains
a relationship with several Health Maintenance Organizations ("HMOs") to provide
dual  choice  indemnity  and Dental HMO plans to segments of members enrolled in
the  HMO.

INDEMNITY  INSURANCE  PLANS

As  a  result  of its desire to respond to the changing marketplace, the Company
expanded  its business to include indemnity dental plans. In September 1992, the
Company  acquired  a  California domiciled life and health insurance company and
renamed  it  SafeHealth  Life  Insurance Company ("SafeHealth Life"). SafeHealth
Life  is regulated by the California Department of Insurance and currently holds
a  Certificate  of  Authority  as  a  life, health and disability insurer in the
states  of  Arizona, California, Colorado, Illinois, Kansas, Maryland, Missouri,
Nevada, New Mexico, Ohio, Oregon, Texas, Utah and Wisconsin. In August 1997, the
Company  also  acquired  a  North  Carolina  domiciled life and health insurance
company  known  as  Consumers  Life  Insurance  Company  of  North  Carolina,
redomesticated it to the State of Texas and renamed it SafeHealth Life Insurance
Company, Inc. ("SafeHealth, Inc."). SafeHealth, Inc. is licensed to transact the
business  of  a  life,  health and disability insurance carrier in the states of
Alabama,  Arizona,  Arkansas,  Delaware,  Florida,  Georgia,  Indiana, Kentucky,
Louisiana,  Mississippi,  North  Carolina,  Oklahoma, South Carolina, Tennessee,
Texas,  and  Virginia.  No  active insurance business was acquired in connection
with  the  acquisition  of  SafeHealth  Inc. The Company completed the merger of
SafeHealth  Inc. into and with SafeHealth Life during the third quarter of 1999.


SafeHealth  Life  has  collaborated  with  other  subsidiaries of the Company to
develop  certain  innovative  marketing  concepts  with  the  intent of offering
consumers  a  multiple choice product consisting of a flexible indemnity plan, a
PPO  plan,  and  a  comprehensive Dental HMO plan in the states where it holds a
Certificate  of  Authority.  The  ability  to offer fee-for-service dental plans
along  with  Dental  HMO  benefits,  better serves new and existing clients. The
Company  also  offers  a  vision  plan  through  SafeGuard  in  California,  and
SafeHealth  Life  in  Colorado, Illinois, Missouri, Nevada and Texas. SafeHealth
Life  utilizes  independent  agents  and  brokers who specialize in the employee
benefits  area  and  appreciate  the ability of SafeHealth Life to custom design
plans  as  needed.

SafeHealth's  client base includes small employer groups as well as governmental
agencies  and  political subdivisions. At the end of 1999, the number of insured
members covered by SafeHealth stood at 97,000. SafeHealth anticipates increasing
production of its multiple choice dental programs in other states in which it is
admitted  to do business. SafeHealth is also offering group term life insurance,
the  volume  of  which  is  currently  insignificant.

In late 1996, the Company purchased an indemnity dental claims processing system
capable  of auto-adjudicating a significant number of claims filed. In 1997, the
Company  acquired  the  source  code  for  its indemnity dental processing claim
system  so as to allow the Company to better utilize the features of this system
so  as  to  maximize  the  technological advantages that are available with this
system.  This  system and its modifications will allow the Company to expand its
indemnity  dental  programs without necessarily incurring significant additional
administrative  expense.


                                      -10-
<PAGE>
The  ownership of an indemnity insurance company exposes the Company to risk for
over  utilization and claims costs in excess of premium revenue. To minimize its
risks,  the  Company  conducts  thorough  claims review and develops lag studies
through the computer system purchased by the Company for its indemnity insurance
business.  The  Company  also  engages  an  actuary  to  assist  the  Company in
developing  its  benefit  programs,  rates  and  payment  schedules.

PREFERRED  PROVIDER  ORGANIZATION

Since 1993, SafeHealth Life has developed its PPO Network program in response to
the  market  demands  to  offer a more cost-effective alternative to traditional
indemnity  insurance,  and  more  freedom  of  choice  than  the  Dental  HMO
network/product  alternatives.  The  PPO  Network  program  was  developed  to
complement  and  also  be  used  as a cost containment mechanism for current and
future indemnity dental plan clients. The negotiated fee arrangements enable the
Company  to  offer indemnity dental and SafeHealth PPO Network Plans that reduce
benefit  costs  for  participating  client  groups  and  members. SafeHealth PPO
Network  Plans  are  designed to encourage a greater level of participation from
participating  network  dentists  due  to  lower  levels  of  benefits  for  the
out-of-network  option.

The  Company also offers PPO Network Lease Services which offer the network as a
stand  alone option for a per-member per-month fee. The Network Lease Service is
intended  to  be  an  option  that  is  marketed  to  Health and Welfare Trusts,
Third-Party  Administrators and Self-funded Employer Groups, again promoting the
cost  containment  features  of the negotiated discounts. The Company assumes no
risk  for  clients  that lease the PPO Network. At December 31, 1999, SafeHealth
had  contracted  with  approximately  9,000  participating general and specialty
dentists  in  the  markets  in  which  it  operates.  The  overall  geographical
distribution of the dental network was developed to allow members easy access to
network  dentists  to  take advantage of negotiated discounts. All participating
dentists  have  passed a strict qualification process and undergo annual quality
assessment reviews as part of ongoing compliance with network participation. The
Company  continues to actively recruit dentists for its PPO plan, and intends to
increase  the  size  of  its  PPO  panel  in  the  future.

The PPO Network offers savings to the Company in the form of lower dollar levels
of  claims costs, and savings to the insured in lower out-of-pocket costs due to
the  PPO Network contracted fees. Administrative review protocol that utilizes a
sophisticated  case  management  system  insures  that the individual needs of a
member  are matched to treatment plans. The necessity and appropriateness of the
treatment  plans  are  continually  monitored  to  assure  a  professional  and
appropriate  treatment conclusion. The combination of the waiver of deductibles,
negotiated  provider  fees  and  case  management  review  system  can result in
significant  member  and  claim  costs  savings.

GEOGRAPHIC  EXPANSION

The  Company's strategy regarding geographic expansion is presently undergoing a
strategic review to identify and capitalize upon opportunities that may exist in
states  in  which  the  Company  is  not  presently  operating. In the past, the
Company's strategy generally has been to enter new states only after obtaining a
major  contract, either by expanding the geographic scope of service to existing
clients,  by  entering  into  contracts  with  new  clients,  or by establishing
marketing  agreements  with  other  organizations.  Geographic expansion is also
expected to be accomplished through acquisition of other Dental HMO or indemnity
insurance  organizations. While the Company generally prefers not to expand into
new  states  until an adequate base of client business exists to help defray the
start-up  costs  of  operations  in  those  new states, the Company is currently
reviewing its strategic opportunities to provide Dental HMO and dental indemnity
benefits  in  other  states  and markets in which the Company does not presently
operate.  A  number  of opportunities exist through strategic affiliations which
the  Company  may  pursue  in  the  future.

Once a decision to expand has been made, the Company usually establishes a local
office  to  provide  sales, marketing and provider services support in the local
market.  Basic  administrative  services  are  provided  by  the  Company at its
regional  offices.  By  using  strategically  located local offices and regional
support  offices,  the  Company  has  better  controlled administrative expenses
associated  with  new  plan  start-ups, and can more efficiently and effectively
service  a  greater  number  of  members  in  each  market.

GOVERNMENT  REGULATION

Many  states  have  laws  establishing  the requirements for, and regulating the
conduct of, the Company and other Dental HMO plans. Such laws vary from state to
state  and  they  generally  require  a  state  license,  frequently  prescribe
requirements  for  contracts, establish minimum benefit levels, impose financial
tests  and  maintain  standards  for  management  and  other personnel. There is
currently  no  regulation  of  the  Company's  plans  at  the  federal  level.


                                      -11-
<PAGE>
Since  some  states  will  only  license  full service health plans, the Company
cannot  enter  those  states  except  in  conjunction  with SafeHealth Life, its
indemnity  insurance subsidiary, or with a full service HMO. Other states permit
only  nonprofit  corporations  to  become  licensed  as  Dental HMO plans, again
limiting  the  Company's  access.  The heavily regulated nature of the Company's
industry  imposes  a  variety  of  potential obstacles to management's plans for
further geographic expansion and could limit the Company's future growth. On the
other  hand,  this regulatory environment also governs the conduct and expansion
prospects  of  existing  and  new  competitors, thereby providing a niche in the
marketplace  for  the  Company.

The  Company's  Dental  HMO  plans are licensed and regulated by pertinent state
authorities.  Among the areas regulated, although not necessarily by each state,
are  the  scope  of  benefits available to members, the content of all contracts
with  clients,  providers  and  others,  tests of financial resources, including
maintenance  of  minimum  stipulated  financial reserves for the benefit of plan
members,  procedures  for  review of quality assurance, enrollment requirements,
minimum  loss  ratios,  "any  willing provider" requirements which may limit the
Company's  right  to restrict the size of its provider network, the relationship
between the plan and its providers, procedures for resolving grievances, and the
manner  in  which  premiums  are  determined  or  structured.

The  Company's  indemnity  insurance  operations  through  SafeHealth  Life  are
regulated  by  the  California  Department  of  Insurance, and the Department of
Insurance  of  the other states in which SafeHealth Life is licensed to transact
insurance  business.  The  Company's  indemnity  insurance  operations  through
SafeHealth Life, Inc. are regulated by the Texas Department of Insurance and the
Department  of  Insurance  in the other states in which SafeHealth Life, Inc. is
licensed  to  transact business. These regulations include specific requirements
with  regard to minimum capital and surplus, permitted investments, advertising,
policy  forms  and  claims  processing  requirements.  The  Company's  insurance
operations  are  also  licensed  to  transact  business  in  other  states which
traditionally  follow  the  compliance  requirements  of the insurance company's
domiciled  state,  while  sometimes imposing minimal specific policy and deposit
requirements  for  the Company's operations in those states. Insurance companies
are  heavily  regulated  and  require  significant cash deposits for capital and
surplus. The Company's ability to expand its insurance operations into states in
which  it  is  not  currently  licensed  is  dependent  for the most part on the
regulatory  review  process which is conducted by the Department of Insurance in
each state in which the Company is applying. Such reviews may take anywhere from
six  to  twenty-four  months.

TRADEMARKS,  SERVICEMARKS  AND  TRADENAMES

The  Company  has  filed,  received approval and has obtained renewal protection
from  the  United  States Patent and Trademark office for certain trademarks and
tradenames  for names and products used by the Company in its ordinary course of
business.  The  Company  has received a trademark, service mark or tradename for
the  following  words  and  phrases  used  with  and  without  distinctive logos
maintained  by  the  Company:

o     SafeGuard  used  with  a  distinctive  logo  depicting  a  modified smile
      used  in  connection  with  its  Dental  HMO  plans;

o     SafeGuard  Health  Plans  used  in  descriptive  material to describe the
      products  offered  by  the  Company;

o     SafeGuard  Dental  Plans  used  to  describe the various Dental HMO plans
      offered  by  the  Company;

o     SafeHealth  Life  used  with  a  descriptive  logo  depicting  a modified
      smile  used by  the  Company  to describe its indemnity insurance and PPO
      products;  and

o     American  Dental  Corporation  adjacent  to  a flag of the State of Texas
      used  in  connection with its Dental HMO plans, the use of which ended in
      1999.

Collectively,  these trademarks, service marks and tradenames were first used in
commerce  in  1984  and have been continuously used thereafter. In addition, the
Company  has  nearly  completed  and  is about to receive trademark/service mark
protection  from  the United States Assistant Commissioner for Trademarks of its
distinctive  logo  depicting  a smile that the Company is currently utilizing in
interstate  commerce.

COMPETITION

The  Company  operates  in  a  highly  competitive  environment  with  numerous
competitors  wherever  the  Company conducts business. The Company's competitors
include  large  insurance  companies  that  offer  both  Dental HMO benefits and
traditional  dental  indemnity  insurance,  HMOs  that  offer  dental  benefits,
self-funded  employer-sponsored  dental  programs,  dental  PPOs,  discounted


                                      -12-
<PAGE>
fee-for-service  dental  plans and other local or regional companies which offer
dental  benefit  programs.  Many  of the Company's competitors are significantly
larger  and  have  substantially greater financial and other resources, than the
Company.

The  Company believes that key factors in selecting a particular dental benefits
company  include  the  comprehensiveness and range of benefit plans offered, the
quality,  accessibility  and  convenience  of  the  plans'  dental networks, the
responsiveness of customer service, and the premium rates charged. The Company's
competitors  compete  aggressively  in  all  of the markets in which the Company
operates  on all of these factors, including situations where the selection of a
dental plan is made through a competitive bidding process. Some markets in which
the  Company  operates also have intense price competition, which could occur in
all  of the markets in which the Company operates in the future. The Company has
seen  increasing  competition  from  all  competitive  sectors  and  the Company
anticipates  that  this  trend  will  continue  in  the  future.

Larger,  national  indemnity  insurance companies that offer both Dental HMO and
indemnity  dental  benefits  may  have  a competitive advantage over independent
dental  plans  due  to  the  availability of multiple product lines, established
business  relationships,  better  name  recognition  and  greater  financial and
information  system  resources.  The  Company  believes  that it can effectively
compete  with  these  insurance  companies  due  to the comprehensiveness of its
management  team  and  resources  directed towards developing competitive dental
benefit  plans  at  premium  rates,  which  are  generally lower than such large
national indemnity insurance companies. Some medical HMOs offer their own dental
benefit  plans  and  others contract with independent Dental HMO plans for those
services.  The  Company believes that it can compete with HMOs that offer dental
benefit  plans  and  the  Company intends to continue to pursue opportunities to
form  relationships  with  HMOs  to  offer  dental benefit plans to HMO members.

Other  than  for  technological expenses associated with the provision of Dental
HMO  and  indemnity  dental  benefit  programs,  the Company's business does not
require substantial amounts of capital. Other than government regulation and the
related  operating  costs  of start-up, there are no significant barriers to new
companies  entering  into the market. There can be no assurance that the Company
will  be  able  to  compete  successfully  with  new  market  entrants. Any such
additional competition could adversely impact the Company's revenues, net income
and  growth  prospects  through  fee  reductions,  loss of providers or clients,
and/or  market  share.

EMPLOYEES

At  March  31,  2000,  the  Company  had  approximately  200 employees, of which
approximately 38 are office and clerical employees represented by a labor union.
The  Company  considers its relations with its employees to be good. The Company
provides  typical  employee  benefits, including a portion of the cost of health
insurance,  dental  insurance,  life  insurance,  and  the  opportunity  to take
advantage  of a 401(k) plan and a flexible spending account under Section 125 of
the  Internal  Revenue Code. Employees are eligible to participate in the 401(k)
plan upon completion of six months of service with the Company. Under the 401(k)
plan,  an employee is allowed to contribute up to 20 percent of his or her gross
compensation  each  pay period to the plan. The Company may, at its option, make
an  employer  contribution  to  the  plan,  which  would  be allocated among the
employees  in  the plan in proportion to the contribution made by each employee.
The  Company  made  no  contributions  to the 401(k) plan during the three years
ended  December  31,  1999. Employees are fully vested in their contributions to
the  401(k)  plan  at  all  times.

RISK  FACTORS

The Company's business and competitive environment involve numerous factors that
expose  it to risk and uncertainty. Some risks relate to the managed dental care
industry  in  general  and  other risks relate to the Company specifically. As a
result  of  the  risks and uncertainties described below, as well as other risks
described  elsewhere in this report, there is no assurance that the Company will
be  able  to maintain its current market position or to return its operations to
profitability.  Some of the risk factors described below have adversely affected
the Company's operating results in the past, and all of these risk factors could
affect  its  future  operating  results.

Waivers  and/or  Maturity Date Extensions from Lenders. As of December 31, 1999,
the  Company was not in compliance with certain financial covenants contained in
the  credit  agreements  related  to its revolving line of credit and its senior
notes  payable.  As  a result, the entire outstanding balance under these credit
agreements,  which  was  $39.5  million at December 31, 1999, is due and payable
upon demand by the lenders. Pursuant to a transaction completed on March 1, 2000
(the  "Transaction"),  these  lenders agreed not to demand or accept any payment
under the credit agreements, and not to take any enforcement actions of any kind
under the agreements until April 30, 2001. However, in the event the conversions
contemplated  in  the  Transaction  (see  below  for  more  discussion)  are not
completed,  the  outstanding  debt  would  still be due and payable on April 30,
2001.  In this event, there can be no assurance that the Company will be able to
refinance  this  outstanding  debt  or  to  obtain  waivers or extensions of the
maturity  date  from the lenders, in which case the Company's financial position
would  be adversely affected to a significant degree. See "RECENT DEVELOPMENTS."


                                      -13-
<PAGE>
Regulatory  Approval for Debt Conversions. On March 1, 2000, the Company entered
into  an  agreement  with both of its lenders and an investor group, under which
the  investor  group loaned $8 million to the Company. Under this agreement, the
investor  group  and the existing lenders agreed to convert the $8 million loan,
the  outstanding  balance of $7.0 million under the bank line of credit, and the
outstanding  balance  of  $32.5  million  under  the senior notes to convertible
preferred  stock,  subject to regulatory approval. Although the Company believes
it  is  likely  that  these  conversions  will  be  approved  by  the applicable
regulators,  there  can  be  no  assurance  that  regulatory  approval for these
conversions  will  be  obtained.

Recent  Operating  Losses.  The  Company  incurred  significant operating losses
during  1999  and  1998. The Company's ability to meet its financial obligations
and  to  continue  its  business  depends  upon  a  return  of its operations to
profitability.  Management's  plans to continue as a going concern and to return
the  Company  to  profitability  include plans to increase premium rates, reduce
certain  types  of  provider  payments,  reduce  the  number of its employees by
consolidating  operations  in  one  location,  reduce the amount of office space
used,  and  reduce  various  other selling, general and administrative expenses.
Management's  plans  also  include  enhanced  programs  for  customer retention,
increasing  the  efficiency  of its provider network and streamlining operations
with  a  focus  toward strengthening customer service. There can be no assurance
that  management  will  be  successful  in  implementing  these  plans.

Shareholder  Litigation.  In  December  1999,  a shareholder lawsuit against the
Company  was  filed,  which alleges that the Company and certain of its officers
violated  certain  securities  laws  by  issuing  a  series of alleged false and
misleading  statements  concerning  the Company's publicly reported revenues and
earnings during a specified class period. The Company has directors and officers
liability  insurance  and  intends  to vigorously defend this litigation. In the
opinion  of  the  Company's management, the ultimate outcome of this matter will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

Government Regulation. The dental care industry is subject to extensive federal,
state  and  local  laws,  rules and regulations. Each of the Company's operating
subsidiaries  is  subject  to  various  requirements  imposed  by state laws and
regulations  related  to the operation of a managed dental care plan or a dental
insurance company, including the maintenance of a minimum amount of tangible net
worth  by  certain subsidiaries. There can be no assurance that the Company will
be  able  to  continue  to  meet all these regulatory requirements. In addition,
dental  care  practice standards and related federal and state regulations could
change  in  the  future.

Ability  to  Sell  Dental  and  Orthodontic  Practices  and/or Promissory Notes.
General  Dental  Practices.  On  October  21,  1996,  the  Company implemented a
strategic plan to sell all of the general dental practices owned by the Company.
The  assets sold consisted primarily of accounts receivable, supply inventories,
equipment  and  leasehold  improvements.  Through  June  1997,  the Company sold
fifteen  general  dental  practices  to purchasers in exchange for consideration
consisting  of  $9.5  million of long-term promissory notes.  In September 1997,
the  Company  sold  the  remaining  practices  to  Pacific  Coast  Dental, Inc.,
Associated  Dental  Services, Inc., and affiliated dentists (the "Purchasers" or
"PCD")  in  exchange  for  consideration consisting of $8.0 million of long-term
promissory  notes.

During  1997 and 1998, of the fifteen practices previously sold to parties other
than  PCD,  four  of  these  practice  were  conveyed to PCD in exchange for the
assumption  of  the  promissory notes payable to the Company. At the time of the
conveyances  of  these  practices  to  PCD,  the related promissory notes had an
aggregate  carrying  value of $1.9 million on the Company's balance sheet, which
exceeded  the  historical cost of the net assets of the related dental practices
by  $1.4  million.

Orthodontic  Practices.  On  February  26,  1998,  the  Company  announced  the
discontinuance  of  its  orthodontic  practices.  The  assets of the orthodontic
practices  consisted  primarily  of  accounts  receivable,  supply inventory and
dental equipment. These assets were sold on April 1, 1998, pursuant to the terms
of  the  definitive  Master Asset Purchase Agreement (the "Agreement") dated and
effective  as  of  April  1,  1998,  by  and  among  the  Company  and PCD.  The
orthodontic  practices  were  sold  for  $15  million,  represented by an 8 1/2%
30-year  promissory  note  and  secured by all current and future assets of PCD,
including  those assets transferred under the Agreement. Among other provisions,
the  Agreement  includes  a  long-term  commitment by PCD to continue to provide
orthodontic  services  to  members  of  the  Company's  dental  HMO  plans.

During  1997  and  1998,  the  entities that purchased four other general dental
practices from the Company conveyed those practices to the Purchaser in exchange
for  the  assumption  of the related promissory notes payable to the Company. At
the  time  of  the  conveyances of these practices to the Purchaser, the related
promissory notes had an aggregate outstanding principal balance of $1.9 million.
In  connection  with the sale of the general dental and orthodontic practices to
PCD,  the Company committed to lend PCD certain amounts for working capital.  As
of  December  31, 1997 and 1998 the working capital loans to PCD amounted to $.8
million  and  $1.6  million,  respectively,  and  the  Company  has  no  further
obligation to provide additional working capital loans.


                                      -14-
<PAGE>
During  1999,  the  Company reached an oral agreement with PCD and another third
party  (the "New Purchaser"), under which all the promissory notes issued to the
Company  by  PCD  (the  "Notes") would be liquidated.  Under this agreement, PCD
would  convey  the dental and orthodontic practices that comprise the collateral
for  the Notes to the New Purchaser, in exchange for proceeds that would be paid
to  the  Company  in  satisfaction  of  the Notes.  Based on this agreement, the
Company  recorded a $6.5 million charge to earnings during the nine months ended
September  30,  1999,  to  reduce  the  carrying  value of the net assets of the
related  dental  and  orthodontic  practices  to  their estimated net realizable
value.  During  March 2000, the Company entered into a definitive agreement with
respect  to  this  transaction,  which is currently pending regulatory approval.

The  failure of the Company to successfully complete the sale of these practices
and  the  liquidation  of  the  related  promissory  notes from PCD could have a
material  adverse  affect  on  the  financial  position  of  the  Company.

Contingent  Liabilities.  The  Company  is contingently liable for certain lease
obligations  related to the dental and orthodontic practices sold by the Company
during  1996, 1997 and 1998. In addition, the Company is contingently liable for
certain  obligations  to  complete  the orthodontic treatment of patients of the
orthodontic  practices  sold  by the Company. There can be no assurance that the
Company  will not make payment under these contingent obligations in the future.

Risk  of  Acquisitions.  The  Company  has completed two acquisitions of managed
dental care companies during the past few years. The Company recently integrated
the  operations  of these businesses with its existing business. There can be no
assurance  that  the  integration  of  these operations into the Company will be
successful.  In  addition, successful completion of this integration could still
require  significant  amounts  of  management's  time. A failure to successfully
complete  this integration could have a material adverse effect on the Company's
financial  results.

Possible  Volatility  of  Stock  Price.  The Company's stock price is subject to
fluctuations.  Stock  price  volatility  can  be caused by actual or anticipated
variations  in  operating results, announcements of new developments, actions of
competitors,  developments  in  relationships  with clients, and other events or
factors. Even a modest shortfall in the Company's operating results, compared to
the expectations of the investment community, can cause a significant decline in
the  Company's stock price. The delisting of the Company's common stock from the
NASDAQ  National  Market,  which  occurred  in  September  1999, can also have a
negative  impact  on  the Company's stock price, its trading volatility, and the
ability  of  stockholders  to  sell  their shares of the Company's common stock.
Broad  stock  market  fluctuations,  which  may  be  unrelated  to the Company's
operating  performance, could also have a negative effect on the Company's stock
price.

Competitive  Market.  The Company operates in a highly competitive industry. Its
ability  to  achieve  profitability  is  affected by significant competition for
employer  groups  and  for  dental providers. There can be no assurance that the
Company  will  be  able  to  compete successfully enough to achieve and maintain
profitability.  Existing  or new competitors could have a negative impact on the
Company's revenues, earnings and growth prospects. The Company expects the level
of  competition  to  remain  high.

Ability  to  Increase  Revenue.  The Company has increased its revenue in recent
years,  except for 1999, primarily through acquisitions, increases in the volume
of  its indemnity dental business, and the addition of vision coverage. Although
the  Company  intends  to  expand  its  business  in the future, there can be no
assurance that the Company will be able to maintain its current level of revenue
or  to  increase  it  in  the  future.  The ability of the Company to expand its
business  will  depend  on  a number of factors, including existing and emerging
competition  and  its  ability  to  maintain  effective control over dental care
costs,  secure  cost-effective  contracts  with  dental providers, introduce new
technologies,  and  obtain  sufficient  working  capital  to support its growth.

Levels  of  Utilization and Dental Care Services. The Company's indemnity dental
plans  are  underwritten  by  a subsidiary that is a licensed insurance company.
These plans subject the Company to underwriting risks associated with changes in
the  utilization  of  dental services by the insured subscribers. If the Company
does  not  accurately assess these underwriting risks, the premium rates charged
to  its clients may not be sufficient to cover its dental care costs. This could
have  a  material  adverse  effect  on  the  Company's  operating  results.


                                      -15-
<PAGE>
In  addition,  dental  care provided by specialists is made available to members
under many of the Company's dental HMO plans. The Company assumes responsibility
under  such  plans  for  such  specialty  care  arrangements.  The  Company  is
responsible  for  payments  to  specialists,  usually  on  a  discounted,
fee-for-service  basis and not on a capitated basis. Accordingly, it retains the
risk  for  the  payment  of  specialty dental care claims. If the utilization of
specialty  dental  care  increases under outstanding dental HMO plans, operating
and  financial  results  could  be  negatively  impacted.

Effect  of  Adverse  Economic  Conditions.  The  Company's  business  could  be
negatively  affected by periods of general economic slowdown or recession which,
among other things, may be accompanied by layoffs by client organizations, which
could  reduce  the  number of members enrolled and increase the pricing pressure
from  clients  and  competitors.

Relationships  with  Dental  Providers.  The  Company's  success is dependent on
having  a  competitive  network  of  quality  dentists  in each of the Company's
geographic  markets.  Generally, the Company and the network dentists enter into
non-exclusive  contracts  that  may  be  terminated by either party with limited
notice.  The  Company's  operating results could be negatively affected if it is
unable  to  establish  and maintain contracts with an adequate number of quality
dentists  in any market in which it operates. See "BUSINESS-PROVIDER RELATIONS."

Dependence  on  Key  Personnel. The Company believes that its success is largely
dependent  upon  the abilities and experience of its senior management team. The
loss  of  the  services of one or more of its senior executives could negatively
affect  the  Company's  operating  results.

KEY DEVELOPMENTS

On  May 28, 1999, the Company restructured the credit agreement related to $32.5
million  of outstanding debt under its unsecured senior notes. The senior notes,
which  have  a  final  maturity  date  of September 30, 2005, (the "Notes") were
modified  to  provide  for  an increase in the interest rate from 7.91% to 9.91%
effective  on April 28, 1999. The interest rate decreased to 8.91% in June 1999,
due  to the execution of a definitive agreement with an investor group regarding
a  planned investment in the company (see more discussion of this below).  Under
the  restructured  agreement, the interest rate would decrease to 7.91% upon the
occurrence  of  certain other events, which have not yet occurred. In connection
with the restructuring, the Company issued warrants to acquire 382,000 shares of
the  Company's  common  stock  to  the  holder  of  the  Notes. The warrants are
exercisable  any time between January 1, 2000, and December 31, 2003, at a price
of  $4.51  per  share.  The  warrants  were  cancelled  in  connection  with the
transaction  completed  on  March  1,  2000,  as  discussed  below.

On  May  28, 1999, the Company also restructured the credit agreement related to
its  $8  million  bank line of credit, under which $8 million was outstanding at
December  31,  1998.  The restructured agreement extended the maturity date from
January  31,  1999  to  January  28,  2000. The interest rate on the outstanding
balance  is equal to the bank's prime rate plus 4%, effective on April 28, 1999.
The  interest rate decreased to prime plus 3% in June 1999, due to the execution
of  a definitive agreement with an investor group regarding a planned investment
in  the  company  (see  more  discussion of this below).  Under the restructured
agreement,  the  interest  rate  would  decrease  to  prime  plus  1.5% upon the
occurrence  of  certain  other  events,  which  have  not  yet  occurred.

Additional  collateral  was  provided to both the senior note holder and line of
credit  lender  under  the  restructured  agreements.  The Company also paid the
out-of-pocket  attorneys'  fees  and  costs incurred by both lenders through the
closing  date,  and  the  cost  of  certain consultants the lenders required the
Company  to  hire.  The  Company  agreed  to  provide  both lenders with monthly
consolidated  financial  statements  and  covenant  compliance certificates, all
Securities  and  Exchange  Commissions filings, and other financial documents as
they  may  reasonably  request.

New provisions include a requirement for the Company to provide the lenders with
any  notice  of  intent  to  audit  from  any  regulatory  agency, and copies of
correspondence from any regulatory agency and the Company's response thereto. In
addition,  the  Company  is  prohibited  from  declaring  dividends  or  other
distributions,  and  may  not  incur  any  liens  on  the  voting  stock  of any
subsidiaries  of  the  Company.  In  the event the Company sells certain assets,
including  the  notes  receivable  related  to  the  sale of dental offices, the
proceeds  have  to  be paid to the holder of the Notes and the Company's line of
credit  lender, in proportions specified in the restructured agreements. Various
other terms, covenants and provisions of the credit agreement, including various
financial  covenants,  were also revised. In consideration of the new agreement,
both  lenders waived all existing defaults under the previous credit agreements.
As of September 30, 1999 and December 31, 1999 the Company was not in compliance
with  these  new  restructured  debt  agreements.

On  June  30, 1999, the Company entered into an agreement with an investor group
under  which  the  investor group agreed to purchase $20 million of senior notes
and  $20  million  of  convertible  preferred  stock  from  the  Company.  This
transaction  was  subject  to  regulatory  approval,  stockholder  approval, and
various  other conditions.  In connection with this agreement, the Company filed


                                      -16-
<PAGE>
a  Proxy  Statement  with  the Securities and Exchange Commission on October 12,
1999.  However, the agreement with the investor group was terminated in February
2000.

On March 1, 2000, the Company entered into an agreement with both of its lenders
and the same investor group, under which the investor group loaned $8 million to
the  Company.  Under this agreement, the investor group and the existing lenders
agreed  to  convert the $8 million loan, the outstanding balance of $7.0 million
under  the  bank  line  of  credit, and the outstanding balance of $32.5 million
under  the  senior  notes  to convertible preferred stock, subject to regulatory
approval.  Under this agreement, both lenders agreed not to demand or accept any
payment  under the credit agreements, and not to take any enforcement actions of
any  kind  under  the  agreements  until  April  30,  2001.

During  June  1999  the  Company  completed  the sale of its former headquarters
office building for approximately $3.5 million, which was the carrying amount of
the  building  on  the  Company's  balance  sheet  as  of December 31, 1998. The
carrying  amount  of the building is reflected on the consolidated balance sheet
under  the  caption  "Assets  Held  for  Sale."

On  September 1, 1999 trading in the Company's common stock was removed from the
NASDAQ  National  Market  due  to  the  Company's inability to meet the relevant
minimum  net  tangible  worth  requirement.

During  1999, the Company recorded a charge to earnings to establish a valuation
allowance against its deferred tax assets.  The amount of the allowance is equal
to  the  total amount of its net deferred tax assets, which was $17.3 million at
December  31,  1999.  The Company's deferred tax assets have been fully reserved
due  to uncertainty about whether they will be realized in the future, primarily
due  to  operating  losses  incurred  by  the  Company  in 1998 and 1999 and the
existence  of  significant  unused  loss  carryforwards.

During  1999,  the  Company reached an oral agreement with PCD and another third
party  (the  "New  Purchaser"),  under  which the promissory notes issued to the
Company  by  PCD  (the  "Notes") would be liquidated.  Under this agreement, PCD
would  convey the dental practices that comprise the collateral for the Notes to
the New Purchaser, in exchange for proceeds that would be paid to the Company in
satisfaction  of  the  Notes.  Based on this oral agreement with PCD and the New
Purchaser,  and  other factors, the Company has determined that the value of the
related  discontinued  net  assets  has been impaired.  Accordingly, the Company
recorded a loss of $6.5 million during the nine months ended September 30, 1999,
which  is included in loss from operations of discontinued operations, to reduce
the carrying value of the assets being transferred to their estimated realizable
value.  During March 2000, the Company entered into a  definitive agreement with
respect to this transaction, which is currently  pending  regulatory  approval.

The  Company  incurred  a significant operating loss during 1999, in addition to
interest  expense  on  outstanding  debt,  the  write-down  of notes receivable,
impairment of discontinued net assets transferred under contractual arrangements
and the valuation allowance against deferred tax assets. The Company borrowed an
additional  $8  million in March 2000, and executed an agreement under which all
of  its  debt  will  be  converted to equity upon regulatory approval.  However,
there  can  be  no assurance that the Company will be successful in returning to
profitability.

In  December  1999,  a  shareholder lawsuit against the Company was filed, which
alleges that the Company and certain of its officers violated certain securities
laws  by  issuing a series of alleged false and misleading statements concerning
the  Company's  publicly reported revenues and earnings during a specified class
period.  The  Company has directors and officers liability insurance and intends
to  vigorously  defend  this  litigation.  In  the  opinion  of  the  Company's
management, the ultimate outcome of this matter will not have a material adverse
effect  on  the  Company's  financial  position  or  results  of  operations.

The Company determined that as of December 31, 1999, the net worth of one of its
subsidiaries,  SafeHealth  Life  Insurance  Company,  was  below  the  required
regulatory  minimum  capital  and  surplus  by  approximately  $4.5  million.  A
significant  portion of the proceeds from the Company's new loan entered into on
March  1,  2000,  described above, was used to resolve this regulatory net worth
deficiency.

ITEM  2.  PROPERTIES
--------------------

During  1997,  the  Company  entered  into  an  agreement  to lease office space
consisting  of  approximately 68,000 square feet in Aliso Viejo, California. The
Company moved its corporate headquarters and executive offices from its previous
location  in  Anaheim,  California  to  Aliso Viejo, California during the third
quarter  of  1998. The Company previously owned a 60,000 square foot building in
Anaheim,  California, which it previously utilized as its corporate headquarters
and  executive offices. The Company sold this building during the second quarter
of  1999.  In  addition,  the Company leases offices in Phoenix, Arizona; Walnut
Creek,  California;  Denver,  Colorado;  Fort  Lauderdale,  Florida;  St. Louis,
Missouri;  and Austin, Dallas, and Houston, Texas. The Company leased all of the
office  space  used  by its previously owned dental practices, which leases have
been  assigned to the entities who purchased the dental practices, but for which


                                      -17-
<PAGE>
the  Company  remains  secondarily  liable. Those leases expire on dates ranging
through  July  2005.  In the opinion of management, the Company's facilities are
adequate  for  its  current  needs.

ITEM  3.  LEGAL  PROCEEDINGS
----------------------------

The  Company  is  subject  to  various  claims and legal actions in the ordinary
course  of  business.  The  Company  believes  all  pending  claims  either  are
adequately covered by insurance maintained by panel providers or the Company, or
will  not  have a material adverse effect on the Company's results of operations
or  financial  position.  In  December  1999,  a shareholder lawsuit against the
Company  was  filed,  which alleges that the Company and certain of its officers
violated  certain  securities  laws  by  issuing  a  series of alleged false and
misleading  statements  concerning  the Company's publicly reported revenues and
earnings during a specified class period. The Company has directors and officers
liability  insurance  and  intends  to vigorously defend this litigation. In the
opinion  of  the  Company's management, the ultimate outcome of this matter will
not  have  a  material  adverse  effect  on  the Company's financial position or
results  of  operations.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS
---------------------------------------------------------------------

No matters were submitted to a vote of security holders during the quarter ended
December  31,  1999.


                                      -18-
<PAGE>
                                     PART II

ITEM  5.  MARKET  FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

(A)  MARKET  INFORMATION

The  Company's common stock is traded on the National Quotation Bureau under the
symbol  SFGD. The following table sets forth the high and low sale prices of the
Company's  common  stock  each fiscal quarter, as reported by NASDAQ. The prices
shown  represent  inter-dealer  prices,  without  retail mark-ups, mark-downs or
commissions,  and  do  not  necessarily  represent  actual  transactions.


<TABLE>
<CAPTION>
                                  HIGH    LOW
                                 ------  ------
<S>                              <C>     <C>
Year ended December 31, 2000:
  First Quarter.. . . . . . . .  $  3.50  $0.41

  Year ended December 31, 1999:
  First Quarter.. . . . . . . .  $  4.63  $2.50
  Second Quarter. . . . . . . .     5.09   2.53
  Third Quarter.. . . . . . . .     5.25   3.13
  Fourth Quarter. . . . . . . .     4.00   0.38

  Year ended December 31, 1998
  First Quarter.. . . . . . . .  $ 13.50  $8.25
  Second Quarter. . . . . . . .     9.38   6.00
  Third Quarter.. . . . . . . .     7.19   3.69
  Fourth Quarter. . . . . . . .     5.50   3.31
</TABLE>


(B)  HOLDERS

As  of  March  31, 2000, there were approximately 1,000 holders of the Company's
common  stock,  including  371  holders  of  record.

(C)  DIVIDENDS

No  cash  dividends  have  been  paid  on  the Company's common stock, and it is
expected  that  there  will  be  no  cash  dividends paid during the foreseeable
future.  The  Company has agreed to pay no cash dividends as long as there is an
outstanding  balance  under  the  revolving  line  of credit or the senior notes
payable.

STOCKHOLDER  RIGHTS  PLAN

In  March 1996, the board of directors of the Company declared a dividend of one
right  to  purchase  a  fraction of a share of its Series A Junior Participating
Preferred  Stock,  having  rights,  preferences,  privileges and restrictions as
designated,  and  under  certain  circumstances,  other  securities,  for  each
outstanding share of the Company's common stock. The dividend was distributed to
stockholders  of  record  at  the  close  of  business  on  April  12, 1996. The
description  and  terms of the Rights are set forth in a Rights Agreement, dated
as  of March 22, 1996, between the Company and American Stock Transfer and Trust
Company,  as  Rights  Agent, as amended.


                                      -19-
<PAGE>
ITEM  6.  SELECTED  FINANCIAL  DATA
-----------------------------------

The  selected  financial  data  in the following table has been derived from the
audited  consolidated  financial  statements of the Company. This data should be
read  in  conjunction  with  such  financial  statements  and notes thereto, and
Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations.

<TABLE>
<CAPTION>
                                                                 YEARS  ENDED  DECEMBER  31,
                                                    -------------------------------------------------
STATEMENT OF OPERATIONS DATA (IN THOUSANDS):          1999       1998       1997      1996     1995
                                                    ---------  ---------  --------  --------  -------
<S>                                                 <C>        <C>        <C>       <C>       <C>
  Premium revenue                                   $ 96,225   $ 97,449   $95,350   $72,709   $60,736

  Health care services expense                        67,559     66,020    65,702    54,534    45,285
  Selling, general and administrative expense         37,041     36,259    25,103    16,292    13,451
  Loss on impairment of assets (1)                    24,576      2,397        --        --        --
                                                    ---------  ---------  --------  --------  -------
  Operating income (loss)                            (32,951)    (7,227)    4,545     1,883     2,000
  Investment and other income                          2,067        624     1,316       984     1,286
  Interest expense                                    (5,855)    (4,311)   (2,871)     (485)       --
                                                    ---------  ---------  --------  --------  -------
  Income (loss) before income taxes and
  discontinued operations                            (36,739)   (10,914)    2,990     2,382     3,286
  Income tax expense (benefit) (2)                    10,934     (3,406)    1,371       980     1,251
                                                    ---------  ---------  --------  --------  -------
  Income (loss) before discontinued operations       (47,673)    (7,508)    1,619     1,402     2,035
  Income (loss) from discontinued operations
  to be disposed of, net of income tax (3)            (4,363)    (2,430)   (7,408)     (852)      353
  Income (loss) on disposal of orthodontic and
  dental practices, net of income tax                     --         --       296     1,678        --
  Cumulative effect of change in accounting
  principle, net of income tax                            --         --        --       824        --
                                                    ---------  ---------  --------  --------  -------
  Income (loss) from discontinued operations, net     (4,363)    (2,430)   (7,112)    1,650       353
                                                    ---------  ---------  --------  --------  -------
  Net income (loss)                                 $(52,036)  $ (9,938)  $(5,493)  $ 3,052   $ 2,388
                                                    =========  =========  ========  ========  =======

  Basic earnings (loss) per share:
  Income (loss) from continuing operations          $ (10.04)  $  (1.58)  $  0.34   $  0.30   $  0.45
  Income (loss) from discontinued operations           (0.92)     (0.51)    (1.50)     0.17      0.08
  Cumulative effect of change in accounting
    Principle                                             --         --        --      0.17        --
                                                    ---------  ---------  --------  --------  -------

  Earnings (loss) per basic share                   $ (10.96)  $  (2.09)  $ (1.16)  $  0.65   $  0.53
                                                    =========  =========  ========  ========  =======

  Weighted average basic shares outstanding            4,747      4,747     4,723     4,711     4,523

  Diluted earnings (loss) per share:
  Income (loss) from continuing operations          $ (10.04)  $  (1.58)  $  0.33   $  0.28   $  0.43
  Income (loss) from discontinued operations           (0.92)     (0.51)    (1.45)     0.17      0.08
  Cumulative effect of change in accounting
    Principle                                             --         --        --      0.17        --
                                                    ---------  ---------  --------  --------  -------

  Earnings (loss) per diluted share                 $ (10.96)  $  (2.09)  $ (1.12)  $  0.62   $  0.51
                                                    =========  =========  ========  ========  =======

  Weighted average diluted shares outstanding          4,747      4,747     4,899     4,940     4,725

  BALANCE SHEET DATA (IN THOUSANDS):
  Cash and short-term investments                   $  5,000   $  3,370   $12,906   $ 9,807   $14,746
  Current assets                                       9,099     11,847    25,800    27,622    23,576
  Total assets                                        28,577     77,956    84,085    68,116    38,343
  Current liabilities                                 17,129     24,521    20,193    11,633     5,941
  Long-term debt                                      39,545     32,500    33,894    19,086        --
  Stockholders' equity (deficit)                     (31,614)    19,766    29,615    35,200    31,929
<FN>

(1)     The  1999  amount  represents a reduction in the carrying value of intangible assets to their
        estimated  realizable  value. The 1998 amount represents a reduction in the carrying value of
        certain notes receivable and real estate to their estimated realizable values. See Note 6 to
        the accompanying financial  statements  for  more  information.
(2)     The  1999  amount  primarily  represents  a charge to establish a valuation allowance against
        deferred  tax  assets.  See  Note  9  to  the  accompanying  financial  statements  for  more
        information.
(3)     These amounts represent operating losses related to discontinued operations prior to the date
        they  were  sold,  subsequent expenses related to those operations, and subsequent reductions
        in the carrying  value of  assets  related to the sale of discontinued operations. See Note 3
        to the accompanying  financial  statements  for  more  information.
</TABLE>


                                      -20-
<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF  OPERATIONS
--------------

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a
"safe  harbor"  for  forward-looking statements, as long as those statements are
identified  as  forward-looking  and  are  accompanied  by meaningful cautionary
statements  identifying  important  factors  that  could cause actual results to
differ  materially from those discussed in the statement. The Company desires to
take advantage of these safe harbor provisions. The statements contained in this
Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations  concerning  expected  growth,  the  outcome  of business strategies,
future  operating results and financial position, economic and market events and
trends,  future  premium  levels,  future dental health care expense levels, the
Company's  ability  to  control health care, selling, general and administrative
expenses, items discussed under the heading "Year 2000" and all other statements
that  are  not  historical  facts, are forward looking statements. Words such as
expects, projects, anticipates, intends, plans, believes, seeks or estimates, or
variations  of  such words and similar expressions are also intended to identify
forward-looking  statements.  These  forward-looking  statements  are subject to
significant  uncertainties  and  contingencies,  many  of  which  are beyond the
control  of  the  Company.  Actual  results  may  differ  materially  from those
projected  in the forward-looking statements, which statements involve risks and
uncertainties.  The  Company's  ability  to  expand  its business is affected by
competition,  not only in benefit program choices, but also the number of dental
plan  competitors  in  the  markets in which the Company operates. Certain large
employer  groups  and other purchasers of commercial dental health care services
continue  to demand minimal premium rate increases, while limiting the number of
choices  offered  to  employees.  In addition, securing cost effective contracts
with dentists may become more difficult in part due to the increased competition
among  dental  plans  for  dentist  contracts. Other risks include the Company's
potential  inability  to  obtain  waivers  and/or  extensions  from its lenders,
whether or not the Company enters into any extraordinary transaction, changes in
the Company's operating or expansion strategy, or failure to consummate proposed
resale  of  dental  offices and/or promissory notes. The Company's profitability
depends,  in part, on its ability to maintain effective control over health care
costs,  while providing members with quality dental care. Factors such as levels
of  utilization  of  dental  health care services, new technologies, specialists
costs, and numerous other external influences may effect the Company's operating
results.  Any critical unresolved Year 2000 issues at the Company or its vendors
could  have  a  material  adverse effect on the Company's results of operations,
liquidity  or financial condition. The Company's expectations for the future are
based  on  current information and evaluation of external influences. Changes in
any  one  factor  could materially impact the Company's expectations relating to
premium  rates,  benefits  plans  offered,  membership growth, the percentage of
health  care  expenses, and as a result, profitability and therefore, effect the
forward-looking  statements which may be included in these reports. In addition,
past  financial  performance  is  not necessarily a reliable indicator of future
performance.  An  investor  should  not  use  historical  performance  alone  to
anticipate  future  results  or  future  period  trends.


                                      -21-
<PAGE>
SUMMARY  OF  RESULTS  OF  OPERATIONS

The following table shows the Company's results of operations as a percentage of
revenue,  and  is  used  in  the  year-to-year  comparisons  discussed  below.

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                                ------------------------
                                                                 1999     1998     1997
                                                                -------  -------  ------
<S>                                                             <C>      <C>      <C>
Premium revenue                                                  100.0%   100.0%  100.0%

Health care services expense                                      70.2     67.7    68.9
Selling, general and administrative expense                       38.5     37.2    26.3
Loss on impairment of assets                                      25.5      2.5      --
                                                                -------  -------  ------

Operating income (loss)                                          (34.2)    (7.4)    4.8

Investment and other income                                        2.1      0.6     1.4
Interest expense                                                  (6.1)    (4.4)   (3.0)
                                                                -------  -------  ------

Income (loss) before income taxes and discontinued operations    (38.2)   (11.2)    3.2
Income tax expense (benefit)                                      11.4     (3.5)    1.4
                                                                -------  -------  ------

Income (loss) before discontinued operations                     (49.6)    (7.7)    1.8
Loss from discontinued operations                                 (4.5)    (2.5)   (7.0)
                                                                -------  -------  ------

Net loss                                                       (54.1)%  (10.2)%  (5.2)%
                                                                =======  =======  ======
</TABLE>


1999  COMPARED  TO  1998

Premium  revenue  decreased by $1.2 million, or 1.3%, from $97.4 million in 1998
to  $96.2 million in 1999. The average membership for which the Company provided
dental coverage decreased by approximately 60,000 members, or 6.4%, from 943,000
members  during  1998  to 883,000 during 1999. Premium revenue decreased by only
1.3% even though average membership decreased by 6.4%. This was primarily due to
a  shift  in  the  product mix toward indemnity plans, which have higher premium
rates  than  managed  care plans, increases in premium rates, and a shift in the
product  mix  toward  managed  care  plans with higher benefit levels and higher
premium  rates.

Health  care  services  expense  increased  by $1.6 million, or 2.3%, from $66.0
million  in  1998  to  $67.6  million in 1999. Health care services expense as a
percentage of premium revenue (the "loss ratio") increased from 67.7% in 1998 to
70.2%  in  1999. This increase is primarily due to an increase in the loss ratio
for  the  managed care plans, which is due to an increase in specialist referral
claims  and an increase in supplemental payments to capitated providers, both as
a  percentage  of  managed  care  premium  revenue.  The  increase in specialist
referral  claims  is  primarily  due  to a shift in the managed care product mix
toward  richer  benefit plans that include coverage of more specialist services.
The increase in supplemental payments is due to the fact that the richer benefit
plans  also  cover more services for which general dentists receive supplemental
payments  from  the  Company,  in  addition  to the monthly capitation payments.

Selling,  general and administrative ("SG&A") expenses increased by $782,000, or
2.2%,  from  $36.3  million in 1998 to $37.0 million in 1999. SG&A expenses as a
percentage  of  premium  revenue  increased from 37.2% in 1998 to 38.5% in 1999.
This  increase  is  primarily due to increased expenses related to the Company's
new  corporate  offices,  which  were first occupied during the third quarter of
1998  (see  Note  6  to  the  consolidated  financial  statements).

Loss  on  impairment  of  assets  increased  from  $2.4 million in 1998 to $24.6
million in 1999. The loss on impairment in 1999 is primarily due to  a reduction
in the carrying value of the goodwill and non-compete covenants  related  to the
acquisition of First American Dental Benefits, Inc. in 1996, and the acquisition
of Advantage Dental HealthPlans in 1997.  The  amount of the impairment loss was
determined  in  accordance with Accounting  Principles Board Opinion No.  17, as
discussed  in Note 6  to  the  accompanying  consolidated  financial statements.

Investment  and other income increased by $1.4 million, or 231.3%, from $624,000
in 1998 to $2.1 million in 1999. This increase was primarily due to net realized
gains  on  the  sale  of  investments  of  $1.2 million in 1999, compared to net
realized  losses  of  $618,000  in  1998.


                                      -22-
<PAGE>
Interest  expense increased by $1.6 million, or 35.8%, from $4.3 million in 1998
to $5.9 million in 1999. This increase was primarily due to expenses incurred in
connection  with restructuring the credit agreements related to the senior notes
payable  and  the revolving line of credit in May 1999. Those expenses consisted
of  $1.0 million of consulting and legal fees and the issuance of stock warrants
with  an  estimated value of $320,000 to the holder of the senior notes payable.

The  loss  before  income taxes and discontinued operations increased from $10.9
million,  or  11.2%  of  premium revenue, in 1998, to $36.7 million, or 38.2% of
premium  revenue,  in  1999.  This increase in the loss was primarily due to the
$24.6  million  loss  on impairment of assets, and an increase in the loss ratio
from  67.7%  in 1998 to 70.2% in 1999. These factors were partially offset by an
increase in investment and other income from $624,000 in 1998 to $2.1 million in
1999.

Income  tax expense was $10.9 million in 1999, compared to an income tax benefit
of  $3.4  million in 1998. The income tax expense in 1999 primarily represents a
charge to earnings to establish a deferred tax asset valuation allowance that is
equal  to  the  entire  balance  of  the Company's net deferred tax assets. This
valuation  allowance  was  established  due  to  uncertainty  about  whether the
deferred  tax  assets will be realized in the future, primarily due to operating
losses incurred by the Company in 1999 and 1998 and the existence of significant
net  operating  loss  carry-forwards.  See  Note 9 to the consolidated financial
statements  for  more  information.

The  loss  from  discontinued  operations  to be disposed of increased from $2.4
million  in  1998  to  $4.4  million  in 1999. The loss in 1999 is due to a $6.5
million  reduction  (before  income  tax effect of $2.1 million) in the carrying
value  of  the  net assets related to certain discontinued operations, which are
reflected under the caption "Assets of discontinued operations transferred under
contractual  arrangements"  on the consolidated balance sheet. During the second
quarter  of  1999,  the  Company  recorded  a $6.5 million charge to earnings to
reduce the carrying value of these assets to their estimated realizable value.

1998  COMPARED  TO  1997

The  Company's revenues for twelve months ended December 31, 1998 increased 2.2%
from  $95,350  to  $97,449  on a membership decrease of 12.6%. The 1997 basis of
comparison, however, includes the acquisition of Advantage in May 1997. On a pro
forma  basis,  including  the effect of the Advantage acquisition for the entire
year,  revenues  for  the same period increased $202 on a membership decrease of
12.6%.  Notwithstanding  the  membership losses, largely in the first quarter of
1998,  the  average  revenue  per  member  increased  due  to  price  increases
implemented  by the Company and an increase in the volume of indemnity business,
which  has significantly higher revenue per member than the dental HMO business.

Health care expenses increased 0.5% or $318 for the twelve months ended December
31,  1998.  As  a  percent  of revenues, health care expenses improved 1.2% from
68.9% of revenues for the twelve months ended December 31, 1997 to 67.7% for the
same  period  in  1998. Including the Advantage acquisition for twelve months of
1997,  health  care  expenses for the period would have been $66,452 or 68.3% of
revenues.  The  comparison  to 1998 then shows a decrease of $432 in health care
expenses  and  a  decrease  of  0.6%  in health care expenses as a percentage of
revenues.  The  Company  continues to improve the health care cost ratios in its
existing  business,  including the business provided by its recent acquisitions.

Selling,  general  and  administrative  expenses  increased  $11,156  or  44.4%.
Including  the  Advantage  acquisition  for  all of 1997, such increase would be
$10,586.  The  increase  experienced in 1998 is attributable to various factors,
including a charge for uncollectible accounts receivable, increases in the sales
and  management staff and other infrastructure components to support anticipated
growth of the Company in the future, the cost of the Company's relocation of its
corporate  headquarters from Anaheim, California to Aliso Viejo, California, and
the  associated  operating  leases, the costs associated with the elimination of
various  job  functions  at  year-end,  and  the  continuing  increases in costs
associated  with  telecommunications  and  computer  networks.

Other  income  decreased by 52.6%, or $692, for the twelve months ended December
31, 1998 from $1,316 in 1997 to $624. This is primarily due to capital losses on
the  sale  of  investments  in  1998.

Loss on impairment of assets in the amount of $2,397 for the twelve months ended
December  31,  1998  primarily  represents  a reduction in the carrying value of
certain  promissory  notes related to the sale of discontinued operations, and a
charge  to  reduce the book value of the old corporate head quarters building to
estimated  net  realizable  value.

Interest  expense increased $1,440 for the twelve months ended December 31, 1998
from  $2,871 in 1997 to $4,311 in 1998, an increase of 50.2%. Such increase is a
result of the interest associated with the working capital credit facility which
was  entered  into  in  1998 and the private placement long-term debt, which was
entered  into  during  1997.


                                      -23-
<PAGE>
The  net  loss  related  to  the  discontinued  orthodontic  and  general dental
practices for the twelve months ended December 31, 1998 was $2,430 versus a loss
of  $7,112  for  the  same  period  in  the  prior  year,  a decrease of $4,682.

Net loss of $9,938 for the twelve months ended December 31, 1998 was an increase
of  $4,445 over the loss of $5,493 reported for the same period a year ago. This
was  primarily  due  to  the  increase  in  selling,  general and administrative
expenses discussed above, which was partially offset by the decrease in the loss
from  discontinued  operations.

LIQUIDITY  AND  CAPITAL  RESOURCES

Net  cash  used  by  operating  activities  was  $492,000  during 1999, compared
to  $1.7  million during 1998. Although the net loss increased from $9.9 million
in  1998  to $52.0 million in 1999, substantially all of the increase was due to
non-cash  expenses.  Net  cash provided by investing activities was $1.9 million
during  1999,  compared  to  $3.0  million during 1998. The Company sold certain
long-term  assets in both 1999 and 1998, as shown on the accompanying statements
of  cash  flows,  to  meet  it cash requirements in both years. Net cash used in
financing  activities  was  $2.6  million  during 1999, compared to $1.8 million
during  1998.  The cash used in financing activities consisted primarily of debt
payments  in  both  years.

The  Company's  total short-term and long-term debt decreased from $42.4 million
at  December 31, 1998, to $39.8 million at December 31, 1999, due to payments of
$2.6  million during 1999. The payments included $1.6 million paid to the former
owners of acquired businesses in connection with non-competition agreements, and
a  $1.0 million reduction in the balance outstanding under the revolving line of
credit.  Outstanding  debt  at  December  31,  1999 consists of $32.5 million of
senior  notes  payable, an outstanding balance of $7.0 million under a revolving
line  of  credit, and a $255,000 note payable to the former owner of an acquired
business  in  connection  with  a  non-competition  agreement.

In  September  1997  the  Company issued $32.5 million of unsecured senior notes
payable.  The senior notes are payable in annual installments of $6.5 million on
each  September  30,  beginning in 2001, with a final maturity date of September
30,  2005.  The  interest  rate  on the notes was fixed at 8.91% at December 31,
1999.

In  January 1998 the Company entered into an $8 million revolving line of credit
facility  with  a bank, under which $7.0 million was outstanding at December 31,
1999.  The  outstanding balance under the credit facility was payable in full on
January 29, 2000. The interest rate on the facility as of December 31, 1999, was
equal to the bank's prime rate plus 3.0 % (11.0% at December 31, 1999). The loan
is secured by all assets of the Company, including accounts receivable, property
and  equipment, intangible assets, and a negative pledge on the stock of all the
Company's  subsidiaries.

In  May 1999 the Company executed restructured credit agreements with respect to
both  the  senior  notes  payable and the revolving line of credit facility. The
restructured  agreements provide for changes in interest rates and modifications
to  the  financial  covenants  and  reporting  requirements, as well as required
principal  repayments.  In  connection  with  the  execution of the restructured
agreements, the Company obtained waivers for all prior and existing defaults and
events  of default under the previous credit agreements through May 28, 1999. In
connection  with  the  restructured  agreements,  the Company issued warrants to
purchase 382,000 shares of common stock for $4.51 per share to the holder of the
senior  notes payable.  The warrants are exercisable at any time from January 1,
2000  to  December  31,  2003.  Those  warrants  were cancelled in March 2000 in
connection  with  the  transaction  described  below.

In  connection with the restructured agreements related to both the senior notes
payable  and  the  revolving  line of credit facility, the Company is subject to
various loan covenant requirements. The Company was not in compliance with those
requirements  as  of  December 31, 1999. However, the outstanding balances under
the  senior  notes  payable  and  the  revolving  line  of  credit  facility are
classified  as  long-term on the accompanying consolidated balance sheet, due to
the  transaction  completed  on  March  1, 2000, as discussed below. The Company
expects  that all of its outstanding debt under the senior notes payable and the
revolving  credit line will be converted to convertible preferred stock in 2000,
pursuant  to  the  transaction  described  below.

On  March  1, 2000, the Company entered into an agreement with an investor group
(the  "Investors"),  the  holder  of  the senior notes payable (the "Senior Note
Holder"),  and  its  revolving  line  of  credit lender (the "Bank"). Under this
agreement, the Investors loaned $8.0 million to the Company in the form of notes
payable  due April 30, 2001, which bear interest at 10% annually. The Investors,
the  Senior Note Holder, and the Bank all agreed to convert the new $8.0 million
loan,  the  outstanding balance of $32.5 million under the senior notes payable,
and  the outstanding balance of $7.0 million under the revolving line of credit,
to  convertible  preferred  stock,  subject  to  regulatory approval. Under this
agreement,  both  the  Senior  Note  Holder and the Bank agreed not to demand or
accept  any payment under the credit agreements, and not to take any enforcement
actions  of  any  kind  under  the  agreements  until  April  30,  2001.

The  convertible  preferred  stock  would  not accrue dividends of any kind, and
would be convertible into an aggregate of 30.0 million shares of common stock of
the  Company, at the option of the holder. The convertible preferred stock would
entitle  the  holder  to  one vote for each share of common stock into which the


                                      -24-
<PAGE>
preferred  stock  is  convertible,  with  respect to all matters voted on by the
common  stockholders  of  the  Company.  As  a result of this transaction, after
regulatory  approval is obtained, the existing stockholders of the Company would
own approximately 13.7% of the common stock interests of the Company. Under this
agreement,  the Company agreed to place new directors on its board of directors,
who  represent  the  Investors,  the  Senior  Note Holder and the Bank, and who,
collectively,  constitute  a  majority  of  the  board  of  directors.

As  of  December  31,  1999, the net worth of one of the Company's subsidiaries,
SafeHealth, was approximately $4.5 million below the minimum capital and surplus
required  by  the  applicable state laws and regulations. Of the proceeds of the
$8.0  million  borrowing  on March 1, 2000, as discussed above, $5.0 million was
invested  in  SafeHealth  to  increase its net worth above the minimum amount of
capital  and  surplus  required.

As  of December 31, 1999, the Company's current liabilities exceeded its current
assets  by  $9.0  million.  The  Company  believes this negative working capital
position  is  mitigated  by  the  $8.0 million proceeds of a long-term borrowing
completed on March 1, 2000, as discussed above. The Company also intends to sell
certain  long-term  assets during the next several months, although there can be
no  assurance  that  it  will  be  successful in doing so. Management's plans to
continue  the  Company's operations as a going concern and to return the Company
to  profitability  include plans to increase premium rates, reduce certain types
of  non-standard  provider  payments,  reduce  the  number  of  its employees by
consolidating  certain  administrative  functions  in  one  location, reduce the
amount  of  office  space  used,  and  reduce various other selling, general and
administrative  expenses.  However, there can be no assurance that the Company's
actual results for future periods will meet current expectations. Based on these
factors  and other relevant considerations, the Company's current expectation is
that  it  has  an  adequate  amount  of  cash  to  operate  its business for the
foreseeable  future.  Also, the Company believes it will be able to obtain
additional financing, if necessary, to support operations.

There  can  be  no  assurance  that  the  Company will remain in compliance with
applicable  regulatory  financial requirements in the future, or that there will
be  no  other unforeseen events that could have a material adverse impact on the
Company's  financial position and the adequacy of its cash balances. The Company
does  not  expect  to  have the financial resources to grow its business through
acquisition  for  the  foreseeable  future.

YEAR  2000  COMPLIANCE

The  Year  2000  issue results from computer programs that use two digits rather
than  four to define the applicable year. Any of the Company's computer programs
that  have  time-sensitive  software,  and  that  use  two  digits to define the
applicable  year,  may  recognize a date using "00" as the year 1900 rather than
the  year 2000. This could result in a system failure or miscalculations causing
a  disruption of operations, including among other things, a temporary inability
to process transactions, send invoices, or engage in normal business activities.

The  Company  relies  heavily upon information technology, including its primary
transaction  processing  systems,  its  telephones,  its building access control
systems,  heating  and ventilation equipment, and other computerized systems, to
conduct  its business. The Company also has numerous business relationships with
employer  groups  and  other  customers,  dental  health  care  providers, other
vendors,  financial  institutions,  and  other  third  parties,  including state
regulators,  who  are  reliant  upon  information  technology  to  conduct their
businesses.  There  can  be  no  assurance  that  none  of  these  entities will
experience  business  disruptions  related to the Year 2000 issue that could, in
turn,  cause  business  disruptions  for  the  Company.

The  Company believes it has adequately modified its information systems so that
dates  in  the  year  2000  are  properly  recognized  by all of its significant
applications.  As  of March 31, 2000, the Company has experienced no significant
impact  on  its  business  related  to  the year 2000 issue, from either its own
information  systems  or  those  of  third  parties with which it does business.


                                      -25-
<PAGE>
IMPACT  OF  INFLATION

The Company's operations are potentially impacted by inflation, which can affect
premium  rates,  health  care  services  expense,  and  selling,  general  and
administrative  expenses.  The  Company  expects  that  its  earnings  will  be
positively  impacted  by  inflation  in premium rates, because premium rates for
dental  benefit plans in general have been increasing due to inflation in recent
years.  The  Company  expects  that  its earnings will be negatively impacted by
inflation  in  health  care  costs,  because  fees charged by dentists and other
dental  providers  have  been  increasing  due to inflation in recent years. The
impact  of  inflation on the Company's health care expenses is mitigated to some
extent by the fact that 45-50% of total health care services expense consists of
capitation  payments  to  providers. In addition, most of the Company's selling,
general  and  administrative  expenses  are impacted by general inflation in the
economy.

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK
---------------------------------------------------------------------------

The  Company  is  not subject to a material amount of risk related to changes in
interest  rates  or  foreign  currency  exchange  rates.

ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA
---------------------------------------------------------

The  Consolidated  Financial  Statements  and  the  related  Notes and Schedules
thereto  filed as part of this 1999 Annual Report on Form 10-K are listed on the
accompanying  Index  to  Financial  Statements  on  page  F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING
--------------------------------------------------------------------------------
AND  FINANCIAL  DISCLOSURE
--------------------------

During  the  two  most  recent  fiscal  years, there have been no changes in the
Company's independent auditors or disagreements with such auditors on accounting
principles  or  financial  statement  disclosures.

PART  III

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
-------------------------------------------------------------------

The  current  directors  and  executive  officers of the Company are as follows:

<TABLE>
<CAPTION>

           Name              Age                        Position
---------------------------  ----  --------------------------------------------------------------
<S>                          <C>   <C>
  James E. Buncher             63  Chief Executive Officer, President and Director
  Ronald I. Brendzel, J.D.     50  Senior Vice President, General Counsel, Secretary and Director
  Carlos Ferrera               36  Vice President - Operations
  Dennis L. Gates, C.P.A.      44  Senior Vice President, Chief Financial Officer and Director
  Herb J. Kaufman, D.D.S.      48  Senior Vice President and Chief Dental Officer
  Kenneth E. Keating           36  Vice President - Sales and Marketing
  Barbara Lucci                40  Vice President - Corporate Services
  Julie Vega                   47  Vice President - Provider Relations
  Steven J. Baileys, D.D.S.    46  Chairman of the Board of Directors
  Jack R. Anderson             75  Director (1)
  Leslie B. Daniels            53  Director (1)
<FN>

(1)  Member  of  Compensation  and  Stock  Option  Committee,  and  Audit  Committee.
</TABLE>

Three  of the six directors of the Company became directors on March 1, 2000, in
connection  with  the  transaction  that  occurred  on March 1, 2000 (see Recent
Developments  for  more  discussion  of this transaction). One board position is
currently  vacant  and  the  person to be appointed to that position will be the
designee  of  the Senior Note Holder and the Bank, pursuant to the March 1, 2000
transaction.  Officers  of  the  Company  are  elected annually and serve at the
pleasure of the board of directors, subject to all rights, if any, under certain
contracts  of  employment.

Mr. Buncher has been President and Chief Executive Officer of the Company, and a
director  of the Company, since March 2000. Prior to that, he has been a private
investor  since  September  1997.  Mr.  Buncher  was  also  President  and Chief
Executive  Officer  of  Community Dental Services, Inc., a corporation operating
dental  practices in California, from October 1997 until July 1998.  Mr. Buncher
was  President of Health Plans Group of Value Health, Inc., a national specialty
managed  care  company,  from  September  1995  to  September 1997. He served as
Chairman, President and Chief Executive Officer of Community Care Network, Inc.,
a Value Health subsidiary, from August 1992 to September 1997, when Value Health
was  acquired  by a third party and Mr. Buncher resigned his positions with that
company.  Mr.  Buncher  currently  serves  on  the board of directors of Horizon
Health  Corporation.


                                      -26-
<PAGE>
Mr.  Brendzel  has  been Senior Vice President, General Counsel, Secretary and a
director  of  the  Company since 1989. He was Chief Financial Officer from April
1988 to May 1996, Vice President -  Corporate Development from August 1980 until
April  1986,  and  held various executive and administrative positions from 1978
until 1980. Mr. Brendzel is a member of the California State Bar and is licensed
to  practice  law  in  the  state  of  California.  He  is  also a member of the
Knox-Keene  Health  Care  Service  Plan  Advisory  Committee,  which assists the
California  Department  of Corporations in regulating managed care health plans.
Mr.  Brendzel  is  also  a  former  member  of  the  Texas  Health  Maintenance
Organization Solvency Surveillance Committee, which assists the Texas Department
of Insurance in regulating health maintenance organizations. Mr. Brendzel is the
brother-in-law  of  Dr.  Baileys.

Mr.  Gates  has  been  Senior  Vice  President and Chief Financial Officer since
November  1999,  and  has been a director of the Company since March 2000.  From
June  1995  to  February  1999,  he  served  as  Chief  Financial  Officer, then
Treasurer,  of  Sheridan  Healthcare,  Inc.,  a  physician  practice  management
company.  From  June  1994 to May 1995, he served as Vice President - Finance of
the  California  Health  Plan Division of FHP International, Inc.  From November
1988  to  June  1994,  he  served  as  Vice  President  - Finance, Secretary and
Treasurer  of  TakeCare,  Inc.,  a  health  maintenance  organization  company.

Mr.  Ferrera has been Vice President - Operations since February 2000. He served
as Vice President - Information Technologies from October 1997 to February 2000.
Mr.  Ferrara  served  as  Vice President -  SafeHealth Life Insurance Operations
from  October 1995, when he joined the Company, to October 1997. From March 1988
to  October  1995,  Mr.  Ferrera  was Director of Provider Relations and Product
Consultant  for  CIGNA  Dental Health. Prior to that, he was a Staff Sergeant in
the  United  States  Air  Force.

Dr.  Kaufman  has  been  Senior  Vice  President and Chief Dental Officer of the
Company  since  January 1997. From January 1995 to January 1997, he was National
Dental  Director  for  CIGNA. From January 1996 to January 1997, Dr. Kaufman was
Chief Executive Officer of CIGNA Dental Health of Arizona, Inc. Prior to that he
was  Regional Dental Director for the western region of CIGNA from February 1990
to  January 1995. Prior thereto, Dr. Kaufman was CIGNA's Dental Director for the
State  of Arizona from April 1989 to February 1990. From September 1984 to April
1989, he was Dental Director and Dental Department Chair for CIGNA Healthcare of
Arizona,  Inc.  Dr.  Kaufman  was in private dental practice from August 1979 to
August  1984.  Prior  thereto,  Dr.  Kaufman was a general dentist in the United
States  Air  Force  from  July  1976  to  June  1979. Dr. Kaufman is licensed to
practice  dentistry  in  the States of Arizona and California. He is a member of
the  American  Dental  Association,  Arizona  Dental Association, and California
Dental  Association.  He  serves  on  the  dental advisory board for Procter and
Gamble,  Health  Services Advisory Group, and on the adjunct faculty at Northern
Arizona  University.

Mr.  Keating  has been Vice President - Sales and Marketing since February 2000.
He  was  the Western Regional Vice President of the Company from October 1997 to
February  2000.  He was Vice President-Imprimis and Guards Office Operations for
the  Company  from  October  1995  until  October  1997.  He  was  Vice
President-SafeHealth  Life  Operations  from  August  1995,  when  he joined the
Company, until October 1995. From March 1987 to July 1995, Mr. Keating served in
various  executive  capacities  for  CIGNA  Dental Health, including Director of
Sales  and  Account  Services,  Director  of Network Development and Director of
Staff  Model  Operations.

Ms.  Lucci has been Vice President - Corporate Services since February 2000. She
served  as  Director of Corporate Services and Human Resources from January 1996
to  February  2000.  From  March  1994,  when she joined the Company, to January
1996,  Ms.  Lucci was a Broker Specialist and Sales and Marketing Administrator.
From February 1988 to March 1994, Ms. Lucci served as Vice President - Franchise
Real  Estate Administration of Conroy's, Inc.  From March 1985 to February 1988,
Ms.  Lucci  was Vice President - Administration and Assistant Operations Officer
for  Dr.  Howard  M.  Stein  Dental  Groups.

Ms.  Vega  has been Vice President - Provider Relations since February 2000. She
served the Company as Executive Director of the Los Angeles market from November
1997  to  February  2000. Prior to that, she was Director - Orthodontic Programs
from October 1995, when she joined the Company, to October 1997. From March 1992
to  October  1995,  Ms.  Vega  was a Provider Relations Manager for CIGNA Dental
Health.

Dr. Baileys has been Chairman of the Board of Directors since September 1995. He
served  as  President  of  the  Company  from  1981  until  March 1997 and Chief
Executive Officer from May 1995 to February 2000. He was Chief Operating Officer
from  1981 to May 1995. From 1975 until 1981, Dr. Baileys served in a variety of
executive  and  administrative  capacities  with  the  Company.  Dr.  Baileys is
licensed to practice dentistry in the State of California. He is a member of the
Southern  California  chapter  of  the  Young  Presidents'  Organization.


                                      -27-
<PAGE>
Mr.  Anderson has been President of Calver Corporation, a health care consulting
and investment firm, and a private investor, since 1982.  Mr. Anderson currently
serves  on  the  board of directors of PacificCare Health Systems, Inc., Horizon
Health  Corporation  and  Genesis  Health  Ventures,  Inc.

Mr.  Daniels  was a founder of CAI Partners, an investment firm, in 1989 and has
been  a  principal  of  that  entity  since  then.  Mr.  Daniels has substantial
experience  investing as a principal in the health care industry.  Over the last
20  years,  Mr.  Daniels  has invested in numerous start-up, venture capital and
buyout  transactions  in  various  sectors  across  the  health  care  spectrum,
including  health  maintenance  organizations,  hospitals, nursing homes, cancer
treatment  centers,  psychiatric  and  substance  abuse services, generic drugs,
pre-clinical  and  clinical contract research organizations and pharmacy benefit
companies.  Mr.  Daniels is currently a director of Pharmakinetics Laboratories,
Inc. He was a past Chairman of Zenith Laboratories, Inc. and has been a director
of  Ivax  Corp.,  Comprecare,  Inc.  and  MIM  Corp.


                                      -28-
<PAGE>
ITEM  11.  EXECUTIVE  COMPENSATION
----------------------------------

The following table discloses compensation paid to the Company's Chief Executive
Officer  as  of  December  31,  1999,  the other four most highly-paid executive
officers  as  of  December 31, 1999 who received total compensation in excess of
$100,000  during  the  year  ended  December  31,  1999,  and  the current Chief
Executive  Officer  and Chief Financial Officer, who recently joined the Company
(the  "Named  Executive  Officers"). The compensation disclosed is for the three
years  ended  December  31,  1999.

<TABLE>
<CAPTION>
                                                                                             LONG-TERM
                                                                                            COMPENSATION
                                                                                               AWARDS
                                                                                              -------
                                                            ANNUAL COMPENSATION       LIFE     STOCK
                                                       ---------------------------  INSURANCE  OPTIONS
            NAME                PRINCIPAL POSITION       YEAR     SALARY    BONUS   PREMIUMS  GRANTED
-----------------------------  ----------------------  --------  --------  -------  --------  -------
<S>                            <C>                     <C>       <C>       <C>      <C>      <C>
  James E. Buncher             President and Chief         1999  $     --  $    --  $    --        --
                                Executive Officer (1)      1998        --       --       --        --
                                                           1997        --       --       --        --

  Steven J. Baileys, D.D.S.    Chairman of the Board       1999   400,000       --    1,260        --
                                of Directors and Chief     1998   400,000       --    1,260    70,000
                                Executive Officer (2)      1997   400,000       --    1,260    50,000

  John E. Cox                  President and Chief         1999   275,000       --       --        --
                                Operating Officer (3)      1998   275,000       --       --    25,000
                                                           1997   258,221       --       --    25,000

  Ronald I. Brendzel, J.D.     Senior Vice President,      1999   185,000       --      900        --
                                General Counsel and        1998   185,000       --      900     5,000
                                Secretary                  1997   185,000       --      900     5,000

  Dennis L. Gates              Senior Vice President       1999    33,333       --       --    50,000
                                and Chief Financial        1998       --        --       --        --
                                Officer (4)                1997       --        --       --        --

  Herb J. Kaufman, D.D.S.      Senior Vice President       1999   170,000       --      249        --
                                and Chief Dental           1998   165,530       --      249     7,500
                                Officer (5)                1997   153,907       --      249    25,000

  Kenneth E. Keating           Western Regional            1999   150,000       --       --        --
                                Vice President (6)         1998   150,000       --       --     5,000
                                                           1997   150,000       --       --     2,500
<FN>

(1)  Mr.  Buncher  joined  the  Company  in  March  2000.  His  current  annual  salary  is  $225,000.
(2)  Dr. Baileys resigned his position as Chief Executive Officer in March 2000. He remains the Chairman
     of the Board of Directors.
(3)  Mr.  Cox  left  the  Company  in  March  2000.
(4)  Mr.  Gates  joined  the  Company  in  November  1999.  His  current  annual  salary  is  $209,000.
(5)  Dr.  Kaufman  joined  the  Company  in  January  1997.
(6)  Mr.  Keating  became  Vice  President  -  Sales  and  Marketing  in  February  2000.
</TABLE>

The Company has employment agreements with Drs. Baileys  and  Kaufman,  and  Mr.
Brendzel.   The  employment  agreements  with   Dr.  Baileys  and  Mr. Brendzel
expire  on   May  31,  2000,  and  provide  for  annual  salaries  of  $400,000
and  $185,000,  respectively.  The  employment  agreement  with  Dr.  Kaufman
expires  on  January 5, 2002, and provides for an annual salary of $170,000. The
Company  may  terminate  any  of  the  agreements  for cause. Each executive may
terminate  his  agreement for any reason. In the event that more than 50% of the
Company's  outstanding  common  stock  is  purchased by an entity that is not an
existing  stockholder,  and newly elected directors constitute a majority of the
Company's  Board of Directors, then each executive, at his option, may terminate
his  employment  agreement. In this event, the Company would be obligated to pay
each  of  Dr.  Baileys  and  Mr.  Brendzel  an  amount  equal  to  three  times
each  employee's  current annual salary and bonus, and would be obligated to pay
Dr.  Kaufman an amount equal to his current annual salary and bonus. The Company
would  also  be  obligated  to  continue  providing  employee  benefits  to each
executive  through the termination date of the employment agreement. Dr. Baileys
and  Mr. Brendzel have each agreed that no acceleration or vesting of any rights
or benefits under his employment agreement related to a change of control of the
Company,  including  severance  payments,  shall  occur  as  a  result  of  the


                                      -29-
<PAGE>
transaction  that  occurred  on March 1, 2000 (see Recent Developments). Mr. Cox
has entered  into  a  separate  employment  termination  agreement,  which  also
included such  a  waiver.

STOCK  OPTION  GRANTS  DURING  THE  YEAR  ENDED  DECEMBER  31,  1999

Stock  options  granted  to  the  Named Executive Officers during the year ended
December  31,  1999  were  as  follows.

<TABLE>
<CAPTION>


                           INDIVIDUAL STOCK OPTION GRANTS
---------------------------------------------------------
                                      % OF TOTAL          POTENTIAL REALIZABLE  VALUE
                           NUMBER OF  OPTIONS             AT ASSUMED ANNUAL RATES OF
                             SHARE    GRANTED EXERCISE     STOCK PRICE APPRECIATION
                           UNDERLYING   TO     PRICE           FOR OPTION TERM
                             OPTIONS EMPLOYEES PER  EXPIRATION------------------
         NAME                GRANTED  IN 1999  SHARE   DATE       5%       10%
---------------------------  -------  -------  -----  ------  --------  --------
<S>                          <C>      <C>      <C>    <C>     <C>       <C>
  James E. Buncher               --    --   $  --         --  $     --  $     --
  Steven J. Baileys, D.D.S.      --    --      --         --        --        --
  John E. Cox                    --    --      --         --        --        --
  Ronald I. Brendzel, J.D.       --    --      --         --        --        --
  Dennis L. Gates            50,000  90.9%   3.75   Oct 2009   117,918   298,827
  Herb J. Kaufman, D.D.S.        --    --      --         --        --        --
  Kenneth E. Keating             --    --      --         --        --        --
</TABLE>


STOCK  OPTION  EXERCISES  AND  YEAR-END  STOCK  OPTION  VALUES

There  were  no  stock  options exercised by any of the Named Executive Officers
during  the  year  ended  December  31,  1999.  Stock  options held by the Named
Executive  Officers  at December 31, 1999 are shown in the following table. None
of  the stock options held by the Named Executive Officers had an exercise price
that was less than the market price of the common stock as of December 31, 1999.
There  were  no  stock  appreciation rights outstanding as of December 31, 1999.
<TABLE>
<CAPTION>


                                 STOCK OPTIONS EXERCISED        NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                              -----------------------------    UNDERLYING UNEXERCISED        IN-THE-MONEY OPTIONS
                                    SHARES                   OPTIONS AT FISCAL YEAR-END      AT FISCAL YEAR-END
                                   ACQUIRED       VALUE      --------------------------  ----------------------------
          NAME                   ON EXERCISE     REALIZED    EXERCISABLE  UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----------------------------  ----------------  -----------  -----------  -------------  -------------  -------------
<S>                           <C>               <C>          <C>          <C>            <C>            <C>

  James E. Buncher                          --           --        --              --    $          --  $         --
  Steven J. Baileys, D.D.S.                 --           --   256,667          63,333               --            --
  John E. Cox (1)                           --           --   100,000          25,000               --            --
  Ronald I. Brendzel, J.D.                  --           --    40,000           5,000               --            --
  Dennis L. Gates                           --           --        --          50,000               --            --
  Herb J. Kaufman, D.D.S.                   --           --    19,167          13,333               --            --
  Kenneth E. Keating                        --           --    10,833           4,167               --            --
<FN>
(1)  Mr.  Cox  left  the  Company  in  March  2000.
</TABLE>


                                      -30-
<PAGE>
ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT
--------------------------------------------------------------------------------

The  following  table  shows  the  number of shares of common stock beneficially
owned  by  each director, each Named Executive Officer and all current directors
and  officers as a group as of March 1, 2000. The number of shares held includes
shares  underlying stock options that are exercisable within 60 days of March 1,
2000.  The named person has sole voting and investment power with respect to all
shares  of  common  stock  listed,  except  where  indicated  otherwise.

<TABLE>
<CAPTION>
                                                NUMBER OF SHARES
                                                  BENEFICIALLY    % OF TOTAL SHARES
        OFFICER OR DIRECTOR                         OWNED (1)         OUTSTANDING
----------------------------------------------  ---------------  ------------------
<S>                                             <C>              <C>
  James E. Buncher                                       25,000                  *
  Ronald I. Brendzel, J.D. (2)                          154,906                3.2
  John E. Cox                                            10,000                  *
  Dennis L. Gates                                            --                  *
  Herb J. Kaufman, D.D.S. (3)                            30,102                  *
  Kenneth E. Keating (4)                                 13,333                  *
  Steven J. Baileys, D.D.S. (5)                       2,020,433               40.7%
  Jack R. Anderson                                      283,000                6.0
  Leslie B. Daniels                                      37,155                  *

  All directors and officers as a group (9 persons)   2,573,929               50.9%
<FN>

     *  Indicates  less  than  one  percent  (1%).

(1)     Includes  options  that are exercisable within 60 days  of  March 1, 2000. Some
        of the stockholders included in this table reside in  states  having  community
        property laws under which the spouse of a stockholder in whose name  securities
        are registered  may  be entitled to share in the management of their  community
        property which  may  include  the  right to  vote  or dispose  of  such shares.

(2)     Includes  options  to  purchase  43,333  shares  of  common  stock.

(3)     Includes  options  to  purchase  30,000  shares  of  common  stock.

(4)     Represents  options  to  purchase  13,333  shares  of  common  stock.

(5)     Includes  options  to purchase 221,667 shares of common stock,  700,767  shares
        of common stock owned by the Baileys Family  Trust,  303,000  shares of  common
        stock held in various trusts for relatives of Dr. Baileys, for all of which Dr.
        Baileys  is  trustee  and  for which Dr.  Baileys  has  sole  power to vote the
        securities, and 150,000 shares of common stock held by the Alvin and  Geraldine
        Baileys Foundation, for which Dr. Baileys is an officer and  director  and  for
        which Dr.  Baileys  has  shared  power  to  vote  the  securities.  Dr. Baileys
        disclaims beneficial ownership of any of  the  shares  in  the  trusts  or  the
        foundation  referenced  above.
</TABLE>


                                      -31-
<PAGE>
PRINCIPAL  STOCKHOLDERS

The  following  table  shows  the  number of shares of common stock beneficially
owned  by  all entities who, to the Company's knowledge, owned 5% or more of the
total  outstanding  common  stock of the Company as of March 31, 2000, except as
indicated  otherwise. The named person has sole voting and investment power with
respect to all shares of common stock listed, except as indicated otherwise. For
purposes  of this Annual Report on Form 10-K, beneficial ownership of securities
is  defined  in  accordance with the rules and regulations of the Securities and
Exchange  Commission  and  generally  means  the  power  to  vote  or dispose of
securities  regardless  of  any  economic  interest  therein.

<TABLE>
<CAPTION>
                                  NUMBER OF SHARES
                                    BENEFICIALLY    % OF TOTAL SHARES
       STOCKHOLDER                    OWNED (1)        OUTSTANDING
----------------------------------  --------------  -----------------
<S>                                 <C>             <C>
Steven J. Baileys, D.D.S. (2)            2,020,433            40.7%
Baileys Family Trust (3)                   700,767            14.8
The Burton Partnership (4)                 521,300            11.0
Jack R. Anderson (5)                       283,000             6.0
Dimensional Fund Advisors, Inc. (6)        265,800             5.6
FMR Corp. (7)                              256,500             5.4

All principal stockholders               3,347,033            67.4

<FN>

(1)     Includes  options  that  are exercisable within 60 days of March 1, 2000. Some of the stockholders
included  in  this  table  reside  in  states  having  community property laws under which the spouse of a
stockholder  in  whose  name securities are registered may be entitled to share in the management of their
community  property  which  may  include  the  right  to  vote  or  dispose  of  such  shares.

(2)     The  address  of  Steven  J.  Baileys,  D.D.S.,  who  is Chairman of the Board of Directors of the
Company,  is 95 Enterprise, Aliso Viejo, California 92656. The amount includes options to purchase 221,667
shares  of  common stock, 700,767 shares of common stock owned by the Baileys Family Trust, 303,000 shares
of  common  stock  held  in  various  trusts for relatives of Dr. Baileys, for all of which Dr. Baileys is
trustee  and  for  which  Dr.  Baileys has sole power to vote the securities, and 150,000 shares of common
stock held by the Alvin and Geraldine Baileys Foundation, for which Dr. Baileys is an officer and director
and  for  which  Dr.  Baileys  has  shared  power to vote the securities. Dr. Baileys disclaims beneficial
ownership  of  any  of  the  shares  in  the  trusts  or  the  foundation  referenced  above.

(3)     The  address  of the Baileys Family Trust, of which Steven J. Baileys, D.D.S., is Trustee, is P.O.
Box  9109,  Newport  Beach, California 92658. The shares indicated do not include 303,000 shares of common
stock  held  in various trusts for relatives of Dr. Baileys, or 150,000 shares of common stock held by the
Alvin  and  Geraldine  Baileys  Foundation.

(4)     The address of The Burton Partnership is P.O. Box 4643, Jackson, Wyoming 83001. A Schedule 13D was
filed  with  the  Securities  and  Exchange  Commission  on  December  8, 1999, with respect to the shares
indicated.

(5)     The  address of Jack R. Anderson is 14755 Preston Road, Suite 515, Dallas, Texas 75240. A Schedule
13D/A  was  filed  with  the  Securities and Exchange Commission on February 16, 2000, with respect to the
shares  indicated.

(6)     The  address  of Dimensional Fund Advisors, Inc. ("Dimensional") is 1299 Ocean Avenue, 11th Floor,
Santa  Monica,  California  90401.  Dimensional  serves  as  an  investment  advisor or manager to certain
investment companies, trusts and accounts, which are the owners of the shares of common stock indicated in
the  table  above.  In  its  role  as  investment  advisor or manager, Dimensional possesses voting and/or
investment  power  over  the  shares  of  common  stock  indicated above. Dimensional disclaims beneficial
ownership  of  such  shares  of  common  stock.  A Schedule 13G was filed with the Securities and Exchange
Commission  on  February  3,  2000,  with  respect  to  the  shares  indicated.

(7)     The  address  of  FMR  Corp.  ("Fidelity")  is 82 Devonshire Street, Boston, Massachussetts 02109.
Fidelity  acts as investment advisor to Fidelity Low-Priced Stock Fund (the "Fund"), which owns the shares
of  common  stock  indicated  above.  Fidelity does not have the power to vote or direct the voting of the
shares  of  common  stock  indicated  above,  which  power resides with the Board of Trustees of the Fund.
Fidelity  carries  out  the  voting of the shares of common stock indicated above under written guidelines
established  by  the Board of Trustees of the Fund. Edward C. Johnson 3rd, chairman of Fidelity, Fidelity,
and  the  Fund each has sole power to dispose of the shares indicated above. A Schedule 13G was filed with
the  Securities  and  Exchange  Commission  on  February  14,  2000, with respect to the shares indicated.
</TABLE>


                                      -32-
<PAGE>
ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS
-------------------------------------------------------------

None.

                                     PART IV

ITEM  14.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES,  AND  REPORTS ON FORM 8-K
--------------------------------------------------------------------------------

(A)  FINANCIAL  STATEMENTS,  FINANCIAL  STATEMENT  SCHEDULES,  AND  EXHIBITS

The  consolidated  financial  statements  and  financial  statement  schedule of
SafeGuard  Health  Enterprises, Inc. filed as part of this 1999 Annual Report on
Form  10-K  are listed in the accompanying Index to Financial Statements on Page
F-1.  An  "Exhibit  Index"  is  included in this 1999 Annual Report on Form 10-K
beginning  on  Page  E-1. All Exhibits are either attached hereto or are on file
with  the  Securities  and  Exchange  Commission.

(B)  REPORTS  ON  FORM  8-K

A  Report on Form 8-K was filed with the Securities and Exchange Commission (the
"SEC")  on  October  8,  1999,  to report that the Company had executed a second
amendment  to  the definitive agreement (the "Agreement") with an investor group
led by CAI Partners and Company and Jack R. Anderson. Under the Agreement, which
was filed as an exhibit to a Form 8-K filed with the SEC on August 13, 1999, the
investor  group  agreed  to  invest  $40  million  into  the  Company.

A  Report on Form 8-K was filed with the SEC on November 16, 1999. This Form 8-K
reported  that  the  Company  had  announced  that it believes its revenues, and
therefore,  its  earnings,  for  the quarter and nine months ended September 30,
1999,  which were previously announced on October 21, 1999, were overstated by a
material  amount.  The  Company  also  reported  that it expected to restate its
annual  financial statements for the years ended December 31, 1998 and 1997, and
certain  quarterly  periods  therein  to  correct  the  accounting  treatment of
transactions  related to discontinued dental office operations, and as such, the
1998  and  1997 annual financial statements and the independent auditors' report
thereon  should  not be relied upon. The Company has filed a Form 10-K/A for the
year  ended  December 31, 1998, which includes restated financial statements for
the years ended December 31, 1998 and 1997, and the independent auditors' report
thereon.

A  Report  on  Form 8-K was filed with the SEC on March 16, 2000, to report that
the  Company  entered into an agreement with both of its lenders and an investor
group,  under  which  the investor group loaned $8 million to the Company. Under
this  agreement,  the  investor group and the existing lenders agreed to convert
the $8 million loan, the outstanding balance of $7.0 million under the bank line
of  credit,  and the outstanding balance of $32.5 million under the senior notes
to  convertible  preferred  stock,  subject  to  regulatory approval. Under this
agreement,  both  lenders  agreed  not to demand or accept any payment under the
credit agreements, and not to take any enforcement actions of any kind under the
agreements  until  April  30,  2001.

The  above-described reports on Form 8-K are hereby incorporated by reference in
this  1999  Annual  Report  on  Form  10-K for the year ended December 31, 1999.


                                      -33-
<PAGE>
                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized.

                       SAFEGUARD HEALTH ENTERPRISES, INC.


     By:     /s/  James  E.  Buncher                 Date:   April  14,  2000
          --------------------------                 -------------------------
     James  E. Buncher
     President and Chief Executive Officer
     (Principal Executive Officer)


     By:    /s/  Dennis  L.  Gates                   Date:   April  14,  2000
          -------------------------                  -------------------------
     Dennis L. Gates
     Senior Vice President, Chief Financial
     Officer  and  Director
     (Principal Accounting fficer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has  been  signed below by the following persons on behalf of the registrant and
in  the  capacities  and  on  the  dates  indicated.



     By:     /s/  James  E.  Buncher                 Date:   April  14,  2000
          ---------------------------------          -------------------------
     James  E.  Buncher
     President, Chif  Executive Officer
     and  Director



     By:     /s/  Steven  J.  Baileys                Date:   April  14,  2000
          ---------------------------------          -------------------------
     Steven J. Baileys,  D.D.S.
     Chairman of the Board of Directors



     By:     /s/  Ronald  I.  Brendzel               Date:   April  14,  2000
          ---------------------------------          -------------------------
     Ronald I. Brendzel,  J.D.
     Senior Vice President, General Counsel,
     Secretary  and  Director



     By:     /s/  Dennis  L.  Gates                  Date:   April  14,  2000
          ---------------------------------          -------------------------
     Dennis  L. Gates
     Senior Vice President, Chief Financial
     Officer  and  Director



     By:     /s/  Jack  R.  Anderson                 Date:   April  14,  2000
          ---------------------------------          -------------------------
     Jack  R.  Anderson
     Director



     By:     /s/  Leslie  B.  Daniels                Date:   April  14,  2000
          ---------------------------------          -------------------------
     Leslie  B.  Daniels
     Director


                                      -34-
<PAGE>
<TABLE>
<CAPTION>
                                              EXHIBIT INDEX



EXHIBIT
NUMBER                                              DESCRIPTION
------       ---------------------------------------------------------------------------------------
<S>           <C>
   2.1        Plans of Acquisition (8)
   3.1        Articles of Incorporation (4)
   3.2        Bylaws (4)
  10.1        1984 Stock Option Plan (3)
  10.2        Stock Option Plan Amendment (1)
  10.3        Stock Option Plan Amendment (5)
  10.4        Stock Option Plan Amendment (6)
  10.5        Amended Stock Option Plan (10)
  10.6        Corporation Grant Deed, dated December 21, 1984, relating to a property located at 505
                 North Euclid Avenue, Anaheim, California (2)
  10.7        Employment Agreement, as Amended, dated May 25, 1995, between Steven J. Baileys,
                 D.D.S. and the Company (7)
  10.8        Employment Agreement, as Amended, dated May 25, 1995, between Ronald I. Brendzel
                 and the Company (7)
  10.9        Employment Agreement dated May 25, 1995, between John E. Cox and the Company (7)
 10.10        Form of Rights Agreement, dated as of March 22, 1996, between the Company and
                 American Stock Transfer and Trust Company, as Rights Agent (7)
 10.11        Employment Agreement dated January 5, 1997, between Herb J. Kaufman, D.D.S. and
                 the Company (10)
 10.12        Credit Agreement dated September 25, 1996, between Bank of America National Trust
                 and Savings Association and the Company (9)
 10.13        Stock Purchase Agreement between Consumers Life Insurance Company and SafeGuard
                 Health Enterprises, Inc. dated March 6, 1997 (11)
 10.14        Purchase Agreement between Associated Dental Services, Inc. and Guards Dental, Inc.
                 dated August 1, 1997 (11)
 10.15        Purchase agreement between Pacific Coast Dental, Inc. and Guards Dental, Inc. dated
                 August 1, 1997 (11)
 10.16        Form of Note Purchase Agreement dated as of September 30, 1997, and form of
                 Promissory Note (12)
 10.17        Form of Master Asset Purchase Agreement effective as of April 1, 1998, and Form of
                 Promissory Note without exhibits (13)
 10.18        Default Forbearance Agreement and Irrevocable Power of Attorney (14)
 10.19        Credit Agreement dated January 29, 1998, between Silicon Valley Bank and the
                 Company (15)
 10.20        First Waiver and Amendment to Note Purchase Agreement (16)
 10.21        Amended and Restated Loan and Security Agreement (16)
 10.22        Debenture and Note Purchase Agreement (17)
 10.23        Stockholder Agreement (17)
 10.24        First Amendment to Debenture and Note Purchase Agreement (18)
 10.25        Second Amendment to Debenture and Note Purchase Agreement (18)
 10.26        Term Sheet Agreement dated as of March 1, 2000 (19)
  21.1        Subsidiaries of the Company
  23.1        Independent Auditor's Consent
  27.1        Financial Data Schedule

<FN>
_________________________________________
(1)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's Registration Statement on Form  S-  filed on September  12,  1983 (File  No.  2-86472).
(2)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Registration  Statement  on  Form  S-1  filed on August 22,  1985 (File  No. 2-99663).
(3)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Registration  Statement on  Form  S-1  filed  on  July  3,  1984 (File  No.  2-92013).
(4)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Annual  Report  of  Form  10-K  for  the  period  ended  December  31,  1987.
(5)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Annual  Report  of  Form  10-K  for  the  period  ended  December  31,  1989.
(6)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Annual  Report  of  Form  10-K  for  the  period  ended  December  31,  1992.


                                       E-1
<PAGE>
(7)    Incorporated  by  reference  herein  to the exhibit of the same number filed as an exhibit to the
       Company's  Annual  Report  of  Form  10-K  for  the  period  ended  December  31,  1995.
(8)    Incorporated by reference herein to Exhibit D filed as an exhibit to the Company's Report on Form
       8-K  dated  September  27,  1996.
(9)    Incorporated by reference herein to Exhibit E filed as an exhibit to the Company's Report on Form
       8-K  dated  September  27,  1996.
(10)   Incorporated  by  reference  herein to the exhibit of the same number filed as an exhibit to the
       Company's  Annual  Report  on  Form  10-K  for  the  period  ended  December  31,  1996.
(11)   Incorporated by reference to the exhibit of the same number filed as an exhibit to the Company's
       quarterly  statement  on  Form  10-Q  for  the  period  ended  June  30,  1997.
(12)   Incorporated  by reference herein to Exhibit 99.1 filed as an exhibit to the Company's Report on
       Form  8-K  dated  October  7,  1997.
(13)   Incorporated  by  reference  herein  to Exhibit F filed as an exhibit to the Company's Report on
       Form  8-K dated April 1, 1998. 14 Referenced, disclosed and filed as an exhibit to the Company's
       Annual Report  on  Form  10-K  for  the  period  ended  December  31,  1998.
(14)   Incorporated  by  reference and disclosed and filed as an exhibit to the Company's Annual Report
       on  Form  10-K  for  the  period  ended  December  31,  1998.
(15)   Incorporated  by reference and disclosed in the Company's Quarterly Report on Form 10-Q for the
       period  ended September 30, 1998 and filed as an exhibit to the Company's Annual Report on Form
       10-K for the  period  ended  December  31,  1998.
(16)   Incorporated by reference and disclosed and filed as an exhibit to the Company's Report on Form
       8-K  dated  as  of  June  4,  1999.
(17)   Incorporated by reference and disclosed and filed as an exhibit to the Company's Report on Form
       8-K  dated  as  of  June  30,  1999.
(18)   Incorporated by reference and disclosed and filed as an exhibit to the Company's Report on Form
       8-K  dated  as  of  October  5,  1999.
(19)   Incorporated by reference and disclosed and filed as an exhibit to the Company's Report on Form
       8-K  dated  as  of  March  16,  2000.
</TABLE>


                                       E-2
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS




                                                                         Page
                                                                         ----

Independent  Auditors'  Report                                           F-2

Financial  Statements

     Consolidated  Balance  Sheets                                       F-3

     Consolidated  Statements  of  Operations                            F-4

     Consolidated  Statements  of  Stockholders'  Equity  (deficit)      F-5

     Consolidated  Statements  of  Cash  Flows                           F-6

     Notes  to  Consolidated  Financial  Statements                  F-7 to F-24

Financial  Statement  Schedule

     Schedule  II  -  Valuation  and  Qualifying  Accounts               S-1


                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To  the  Board  of  Directors  and Shareholders of SafeGuard Health Enterprises,
Inc.:

We have audited the accompanying consolidated balance sheets of SafeGuard Health
Enterprises,  Inc.  and subsidiaries (the "Company") as of December 31, 1999 and
1998,  and  the  related  consolidated  statements  of operations, stockholders'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 1999. Our audits also included the financial statement schedule for
the  years ended December 31, 1999, 1998 and 1997, included in the Index at Item
14(a)(2).  These  consolidated  financial  statements  and  financial  statement
schedule  are the responsibility of the Company's management. Our responsibility
is  to  express  an  opinion on the financial statements and financial statement
schedule  based  on  our  audits.

We conducted our audits in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

In  our  opinion,  such consolidated financial statements present fairly, in all
material  respects, the financial position of SafeGuard Health Enterprises, Inc.
and  subsidiaries  as  of  December  31, 1999 and 1998, and the results of their
operations  and their cash flows for each of the three years in the period ended
December  31,  1999, in conformity with accounting principles generally accepted
in  the  United  States  of  America.  Also,  in  our opinion, such consolidated
financial  statement  schedule,  when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken  as  a whole, presents fairly, in all
material  respects,  the  information  set  forth  therein.


DELOITTE  &  TOUCHE  LLP


Costa  Mesa,  California
April  13, 2000


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                            SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                                        CONSOLIDATED BALANCE SHEETS
                                      AS OF DECEMBER 31, 1999 AND 1998
                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                                         1999       1998
                                                                                       ---------  ---------
                                                ASSETS
<S>                                                                                    <C>        <C>
Current assets:
  Cash and cash equivalents                                                            $  1,639   $  2,978
  Investments available-for-sale, at estimated fair value                                 3,361        392
  Accounts receivable, net of allowances of $1,054 in 1999 and $1,942 in 1998             2,978      3,345
  Assets held for sale                                                                       --      3,562
  Income taxes receivable                                                                   480        485
  Prepaid expenses and other current assets                                                 641      1,017
  Deferred income taxes                                                                      --         67
                                                                                       ---------  ---------
    Total current assets                                                                  9,099     11,846

Property and equipment, net of accumulated depreciation                                   4,816      6,105
Restricted cash ($360 in 1999 and $278 in 1998) and
  investments available for sale, at estimated fair value                                 3,454      6,298
Investments available-for-sale, at estimated fair value                                     515        772
Notes receivable, net of allowances of $3,839 in 1999 and $2,020 in 1998                  3,505      3,523
Assets of discontinued operations transferred under contractual arrangements              2,500      8,950
Intangible assets, net of accumulated amortization of $58 in 1999 and $3,622 in 1998      4,437     31,807
Deferred income taxes                                                                        --      8,415
Other assets                                                                                251        240
                                                                                       ---------  ---------

    Total assets                                                                       $ 28,577   $ 77,956
                                                                                       =========  =========

                             LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                                                     $  5,771   $  4,918
  Other accrued expenses                                                                  3,691      5,129
  Short-term debt                                                                           255      9,894
  Claims payable and claims incurred but not reported                                     6,437      3,558
  Deferred revenue                                                                        1,975      1,022
                                                                                       ---------  ---------
    Total current liabilities                                                            18,129     24,521

Long-term debt                                                                           39,545     32,500
Other long-term liabilities                                                               2,517      1,169
Commitments and contingencies (Note 10)                                                      --         --

Stockholders' equity (deficit):
  Preferred stock - $.01 par value; 1,000,000 shares authorized;
    no shares issued or outstanding                                                          --         --
  Common stock - $.01 par value; 30,000,000 shares authorized;
    4,747,000 shares issued and outstanding in 1999 and 1998                             21,829     21,509
  Retained earnings (accumulated deficit)                                               (35,302)    16,734
  Accumulated other comprehensive income (loss)                                             (18)      (354)
  Treasury stock, at cost                                                               (18,123)   (18,123)
                                                                                       ---------  ---------
    Total stockholders' equity (deficit)                                                (31,614)    19,766
                                                                                       ---------  ---------

    Total liabilities and stockholders' equity (deficit)                               $ 28,577   $ 77,956
                                                                                       =========  =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                      SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF OPERATIONS
                          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                             (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                   1999       1998       1997
                                                                 ---------  ---------  --------
<S>                                                              <C>        <C>        <C>
Premium revenue                                                  $ 96,225   $ 97,449   $95,350

Health care services expense                                       67,559     66,020    65,702
Selling, general and administrative expense                        37,041     36,259    25,103
Loss on impairment of assets                                       24,576      2,397        --
                                                                 ---------  ---------  --------

Operating income (loss)                                           (32,951)    (7,227)    4,545

Investment and other income                                         2,067        624     1,316
Interest expense                                                   (5,855)    (4,311)   (2,871)
                                                                 ---------  ---------  --------

Income (loss) before income taxes and discontinued operations     (36,739)   (10,914)    2,990
Income tax expense (benefit)                                       10,934     (3,406)    1,371
                                                                 ---------  ---------  --------

Income (loss) before discontinued operations                      (47,673)    (7,508)    1,619

Discontinued operations:
  Loss from operations to be disposed of (net of income tax
    benefit of $2,087 in 1999, $1,554 in 1998 and $4,736 in 1997)  (4,363)    (2,430)   (7,408)
  Income on disposal of orthodontic and dental
    practices (net of income tax expense of $189 in 1997)              --         --       296
                                                                 ---------  ---------  --------

  Loss from discontinued operations                                (4,363)    (2,430)   (7,112)
                                                                 ---------  ---------  --------

    Net loss                                                     $(52,036)  $ (9,938)  $(5,493)
                                                                 =========  =========  ========

Basic earnings (loss) per share:
  Income (loss) from continuing operations                       $ (10.04)  $  (1.58)  $  0.34
  Loss from discontinued operations                                 (0.92)     (0.51)    (1.50)
                                                                 ---------  ---------  --------

    Net loss                                                     $ (10.96)  $  (2.09)  $ (1.16)
                                                                 =========  =========  ========

Weighted average basic shares outstanding                           4,747      4,747     4,723

Diluted earnings (loss) per share:
  Income (loss) from continuing operations                       $ (10.04)  $  (1.58)  $  0.33
  Loss from discontinued operations                                 (0.92)     (0.51)    (1.45)
                                                                 ---------  ---------  --------

Net loss                                                         $ (10.96)  $  (2.09)  $ (1.12)
                                                                 =========  =========  ========

Weighted average diluted shares outstanding                         4,747      4,747     4,899
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                              SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                               ACCUMULATED
                                                                                  OTHER
                                         NUMBER OF SHARES                     COMPREHENSIVE
                                         -----------------   COMMON    RETAINED   (LOSS)   TREASURY
                                         COMMON  TREASURY    STOCK    EARNINGS    INCOME     STOCK     TOTAL
                                         ------  ---------  -------  ----------  --------  ---------  ---------
<S>                                      <C>     <C>        <C>      <C>         <C>       <C>        <C>
Balances, January 1, 1997                 7,991    (3,275)  $21,255  $  32,165   $   (97)  $(18,123)  $ 35,200
Comprehensive income (loss):
  Net loss                                   --        --        --     (5,493)       --         --     (5,493)
  Net unrealized holding losses
    arising during the year                  --        --        --         --      (357)        --       (357)
  Less reclassification adjustment for
    net gains included in net loss           --        --        --         --        11         --         11
                                         ------  ---------  -------  ----------  --------  ---------  ---------
  Net unrealized loss on investment
    securities available-for-sale, net
    of tax benefit of $221                   --        --        --         --      (346)        --       (346)
                                         ------  ---------  -------  ----------  --------  ---------  ---------
Total comprehensive income (loss)            --        --        --     (5,493)     (346)        --     (5,839)
Exercise of stock options, net of
  tax benefit of $121                        31        --       254         --        --         --        254
                                         ------  ---------  -------  ----------  --------  ---------  ---------

Balances, December 31, 1997               8,022    (3,275)   21,509     26,672      (443)   (18,123)    29,615
Comprehensive income (loss):
  Net loss                                   --        --        --     (9,938)       --         --     (9,938)
  Net unrealized holding losses
    arising during the year                  --        --        --         --      (161)        --       (161)
  Less reclassification adjustment for
    net gains included in net loss           --        --        --         --       250         --        250
                                         ------  ---------  -------  ----------  --------  ---------  ---------
  Net unrealized gain on investment
    securities available-for-sale, net
    of tax of $57                            --        --        --         --        89         --         89
                                         ------  ---------  -------  ----------  --------  ---------  ---------
Total comprehensive income (loss)            --        --        --     (9,938)       89         --     (9,849)
                                         ------  ---------  -------  ----------  --------  ---------  ---------

Balances, December 31, 1998               8,022    (3,275)   21,509     16,734      (354)   (18,123)    19,766
Comprehensive income (loss):
  Net loss                                   --        --        --    (52,036)       --         --    (52,036)
  Net unrealized holding losses
    arising during the year                  --        --        --         --      (135)        --       (135)
  Less reclassification adjustment for
    net gains included in net loss           --        --        --         --       471         --        471
                                         ------  ---------  -------  ----------  --------  ---------  ---------
  Net unrealized gain on investment
  securities available-for-sale, net
  of tax of $226                             --        --        --         --       336         --        336
                                         ------  ---------  -------  ----------  --------  ---------  ---------
Total comprehensive income (loss)            --        --        --    (52,036)      336         --    (51,700)
Issuance of stock warrants                   --        --       320         --        --         --        320
                                         ------  ---------  -------  ----------  --------  ---------  ---------

Balances, December 31, 1999               8,022    (3,275)  $21,829  $ (35,302)  $   (18)  $(18,123)  $(31,614)
                                         ======  =========  =======  ==========  ========  =========  =========
</TABLE>


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                       SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                           YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                              (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                    1999       1998       1997
                                                                  ---------  ---------  ---------
<S>                                                               <C>        <C>        <C>

Cash flows from operating activities:
  Net loss                                                        $(52,036)  $ (9,938)  $ (5,493)
  Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
    Loss from discontinued operations                                4,363      2,430      7,408
    Gain on disposal of discontinued operations                         --         --       (296)
    Loss on impairment of assets                                    24,576      2,397         --
    Depreciation and amortization                                    3,832      3,505      2,284
    Write-off of deferred loan costs                                 1,954         --         --
    Deferred income taxes                                           10,569     (2,349)    (1,380)
  Changes in operating assets and liabilities, net
    of effects of acquisition:
    Accounts receivable                                                367        912       (105)
    Income taxes receivable                                              5       (353)       (88)
    Prepaid expenses and other current assets                          365        449       (299)
    Accounts payable and accrued expenses                            1,599      4,003        134
    Deferred revenue                                                   953       (155)       625
    Claims payable and claims incurred but not reported              2,879        (73)       801
                                                                  ---------  ---------  ---------
Net cash (used in) provided by continuing operations                  (574)       828      3,591
Net cash used in discontinued operations                                --     (2,779)    (5,183)
                                                                  ---------  ---------  ---------
    Net cash used in operating activities                             (574)    (1,951)    (1,592)

Cash flows from investing activities:
  Purchase of investments available-for-sale                       (13,267)   (10,169)    (9,386)
  Proceeds from sales/maturity of investments available for sale    13,815     11,319      9,903
  Purchase of investments held-to-maturity                              --         --     (8,104)
  Proceeds from maturity of investments held-to-maturity                --      4,906      5,063
  Purchases of property and equipment                               (1,220)    (2,357)    (2,118)
  Proceeds from sale of property and equipment                       3,500         --         --
  Payments received on notes receivable                                518         92        265
  Issuance of notes receivable                                        (500)      (750)        --
  Cash paid for business acquired, net of cash acquired                 --         --     (1,203)
  Additions to intangibles and other assets                           (969)        --     (2,109)
                                                                  ---------  ---------  ---------
Net cash provided by (used in) continuing operations                 1,877      3,041     (7,689)
Net cash used in discontinued operations                                --         --       (684)
                                                                  ---------  ---------  ---------
    Net cash provided by (used in) investing activities              1,877      3,041     (8,373)

Cash flows from financing activities:
  Borrowings on long-term debt                                          --      8,000     40,500
  Payments on notes payable and long-term debt                      (2,594)    (9,692)   (27,692)
  Proceeds from exercise of stock options                               --         --        133
  Payments on accrued compensation agreement                           (48)       (72)       (30)
                                                                  ---------  ---------  ---------
    Net cash (used in) provided by financing activities             (2,642)    (1,764)    12,911
                                                                  ---------  ---------  ---------
Net increase (decrease) in cash                                     (1,339)      (674)     2,946
Cash and cash equivalents at beginning of year                       3,256      3,652        706
                                                                  ---------  ---------  ---------

Cash and cash equivalents at end of year                          $  1,639   $  2,978   $  3,652
                                                                  =========  =========  =========
</TABLE>

See  accompanying  Notes  to  Consolidated  Financial  Statements.


                                      F-6
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE1.  ORGANIZATION  AND  SIGNIFICANT  ACCOUNTING  POLICIES
------------------------------------------------------------

SafeGuard  Health  Enterprises,  Inc.,  a  Delaware corporation (the "Company"),
provides  managed  care  dental benefit plans, indemnity dental insurance plans,
and  other  related  products  to  customers in several states. The Company is a
holding  company  that conducts its operations through several subsidiaries, one
of  which  is  an  insurance company that is licensed in several states, and the
rest  of  which are licensed as managed dental care plans in the states in which
they  operate.  The  Company  provides  dental benefits to approximately 900,000
individuals  through  a  managed  care  network  of  contracted  dentists  and a
preferred  provider organization of contracted dentists. The Company was founded
as  a  non-for-profit  entity  in  California  in  1974,  and was converted to a
for-profit  entity in 1982. The Company acquired a licensed insurance company in
1992,  a  Texas-based  managed  dental  care  company  in 1996, another licensed
insurance  company  in  1997, and a Florida-based managed dental care company in
1997.  The  two  licensed insurance companies were merged in 1999. The Company's
financial  statements  were  prepared  in  accordance with accounting principles
generally  accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been prepared on a going concern
basis,  which  contemplates  the  realization  of assets and the satisfaction of
liabilities in the normal course of business. The Company's financial statements
do not include any adjustments relating to the recoverability and classification
of  recorded asset amounts or the amounts and classification of liabilities that
might  be necessary should the Company be unable to continue as a going concern.
As  shown  in the financial statements, during the years ended December 31, 1999
and  1998,  the  Company  incurred net losses of $52.0 million and $9.9 million,
respectively,  and  net  cash used by operating activities was $492,000 and $1.7
million,  respectively.  As of December 31, 1999 and 1998, the Company's current
liabilities  exceeded  its  current  assets  by  $9.0 million and $12.7 million,
respectively.  As  of December 31, 1999, the Company was in violation of certain
financial covenants related to the credit agreements with its two major lenders.
In  addition,  the  net worth of one of the Company's regulated subsidiaries was
$4.5  million  below  the minimum regulatory requirement, prior to completion of
the  transaction  on  March  1,  2000,  as  discussed  in  Note  14.

As  of December 31, 1999, the Company's current liabilities exceeded its current
assets  by  $9.0  million.  The  Company  believes this negative working capital
position  is  mitigated  by  the  $8.0 million proceeds of a long-term borrowing
completed on March 1, 2000, as discussed above. The Company also intends to sell
certain  long-term  assets during the next several months, although there can be
no  assurance  that  it  will  be  successful  in  doing  so.

Management  believes  that  the  Company's  continuation  as  a going concern is
dependent  upon  its  ability  to  generate  sufficient  cash  flow  to meet its
obligations  on  a  timely  basis, to comply with the terms and covenants of its
financing  agreements,  to  obtain  additional financing as may be required, and
ultimately  to attain profitable operations. As further discussed in Note 14, on
March 1, 2000 the Company entered into an agreement with its primary lenders and
an  investor  group.  Under this agreement all the Company's debt is expected to
be  converted  to  equity,  and  the  Company  was  able to use a portion of the
proceeds  of  the  $8  million  loan to resolve the minimum net worth deficiency
noted  above.  This  transaction is pending shareholder and regulatory approval.
Also  in  connection  with  this  agreement,  the  Company  obtained a new chief
executive officer and certain new directors. Management's plans to continue as a
going  concern  and  to  return  the  Company  to profitability include plans to
increase  premium rates, reduce certain types of non-standard provider payments,
reduce  the  number  of  its  employees  by consolidating certain administrative
functions  in  one  location, reduce the amount of office space used, and reduce
various  other selling, general and administrative expenses.  Management's plans
also include enhanced programs for customer retention, increasing the efficiency
of  its  provider  network  and  streamlining  operations  with  a  focus toward
strengthening  customer  service.  Management  believes  that the results of its
plans, and with the agreement reached on March 1, 2000 discussed above, that the
Company  will  be  able  to  meets its ongoing obligations on a timely basis and
return  to  profitable  operations. The Company also believes it will be able to
obtain additional financing, if nessessary, to support operations.

BASIS  OF  CONSOLIDATION

The  consolidated  financial  statements include all the accounts of the Company
and  its  subsidiaries.  Significant intercompany accounts and transactions have
been  eliminated  in  consolidation.

RESTRICTED  DEPOSITS  AND  MINIMUM  NET  WORTH  REQUIREMENTS

Several  of  the  Company's  subsidiaries  are subject to state regulations that
require them to maintain restricted deposits in the form of cash or investments.
As  of  December 31, 1999 and 1998, the Company had total restricted deposits of
$3.5  million  and  $6.3  million,  respectively.  In  addition,  some  of those


                                      F-7
<PAGE>
subsidiaries  are  required  to  maintain minimum amounts of tangible net worth.
Substantially  all of the Company's cash and investments as of December 31, 1999
were  required  to meet those minimum net worth requirements, and therefore, the
Company  had  no  material  amount of cash or investments that was available for
other  corporate  purposes.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  accompanying  consolidated  balance  sheet includes the following financial
instruments:  cash, investments, accounts receivable, notes receivable, accounts
payable  and  accrued  expenses, and short-term and long-term debt. All of these
financial  instruments,  except  for  notes  receivable  and long-term debt, are
current  assets  or current liabilities. Because the current assets are expected
to  be  realized  and  the  current liabilities are expected to be paid within a
short  period  of  time,  the  carrying  amount  of  these financial instruments
approximates  fair  value.  The notes receivable, which are long-term, have been
written  down  to  the  Company's  estimate  of  net  realizable  value,  which
approximates  fair  value.  Long-term  debt  is  stated at the amount originally
loaned  to  the  Company.  Due to the transaction discussed in Note 14, the fair
value  of  the  Company's  long-term  debt  cannot  be  determined.

INTANGIBLE  ASSETS

Intangible assets at December 31, 1999 consist of goodwill and a non-competition
covenant  related  to  the acquisition of a managed dental care company in 1996.
Goodwill  represents  the  excess  of the purchase price of the acquired company
over  the fair value of the net assets acquired, and which is being amortized on
a  straight-line  basis  over  40  years.  The Company's accounting policy is to
amortize  intangible  assets  over their estimated useful lives. The Company has
estimated  that  its  goodwill  has  a  useful life of 40 years from the date of
acquisition  of  the  related  entity.  See  Note 6 for the Company's policy for
assessing  recoverability  of  goodwill and a discussion of a charge to earnings
during  1999  for  impairment  of  goodwill.

RECOGNITION  OF  REVENUE  AND  HEALTH  CARE  EXPENSE

Premium  revenue  is  recognized  in  the period during which dental coverage is
provided to the related individuals. Payments received from customers in advance
of  the  period  of  coverage are reflected on the accompanying balance sheet as
deferred  revenue.  Health  care services expense is recognized in the period in
which  the  services  are delivered. The estimated liability for claims incurred
but  not  reported is based primarily on the average historical lag time between
the  date of service and the date the related claim is submitted to the Company,
as  well  as  the  recent  trend  in the aggregate amount of incurred claims per
covered  individual. Since the liability for incurred but not reported claims is
necessarily an actuarial estimate, the amount of claims eventually submitted for
services  provided  prior  to  the balance sheet date could differ significantly
from  the  estimated  liability.

USE  OF  ESTIMATES  IN  FINANCIAL  STATEMENTS

The  preparation  of  financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities,  the disclosure of
contingent  assets  and  liabilities,  and  the reported amounts of revenues and
expenses.  Actual  results  could  differ  from  those  estimates.

EARNINGS  (LOSS)  PER  SHARE

Earnings  (loss)  per  share  are  presented  in  accordance  with  Statement of
Financial  Accounting  Standards  ("SFAS")  No.  128,  Earnings Per Share. Basic
earnings  (loss)  per  share  are  based  on  the weighted average common shares
outstanding,  excluding  the  effect  of  any  potentially  dilutive securities.
Diluted  earnings  (loss)  per  share  are  based on the weighted average common
shares outstanding, including the effect of all potentially dilutive securities.
During  the  three  years  ended  December  31,  1999,  the potentially dilutive
securities  consisted  entirely of stock options. Due to the net losses incurred
in  1999  and  1998,  the  outstanding stock options would have an anti-dilutive
effect on diluted earnings (loss) per share.  Accordingly, the stock options are
excluded  from  the calculation of the diluted loss per share for 1999 and 1998.
The  weighted  average  diluted  shares outstanding were computed as follows (in
thousands):


                                      F-8
<PAGE>
<TABLE>
<CAPTION>
                                              YEARS ENDED DECEMBER 31,
                                                -------------------
                                                1999   1998   1997
                                                -----  -----  -----
<S>                                             <C>    <C>    <C>
  Weighted average basic shares outstanding     4,747  4,747  4,723
  Effect of dilutive stock options outstanding     --     --    176
                                                -----  -----  -----

  Weighted average dilutive shares outstanding  4,747  4,747  4,899
                                                =====  =====  =====
</TABLE>


SUPPLEMENTARY  CASH  FLOW  INFORMATION

Supplementary information related to the accompanying consolidated statements of
cash  flows  is  as  follows  (in  thousands):


<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                    ------------------------
                                                     1999    1998     1997
                                                    ------  ------  --------
<S>                                                 <C>     <C>     <C>
  Supplemental disclosure of non-cash activities:
    Tax benefit from exercise of stock options      $   --  $   --  $   121

  Supplementary information:
    Cash paid during the year for:
    Interest                                        $4,189  $4,008  $ 2,872

  Purchase of businesses acquired (Notes 1 and 3):
    Fair value of assets acquired                   $   --  $   --  $17,342
    Less: cash acquired                                 --      --   (5,455)
    Less: note payable issued                           --      --   (9,500)
    Less: liabilities assumed                           --      --   (1,184)
                                                    ------  ------  --------

      Cash paid for business acquired               $   --  $   --  $ 1,203
                                                    ======  ======  ========
</TABLE>

RECENT  ACCOUNTING  PRONOUNCEMENTS

In June 1998 the FASB issued SFAS No. 133, Accounting for Derivative Instruments
and  Hedging  Activities, which was amended by SFAS No. 137, which was issued in
June  1999.  SFAS No. 133, as amended, will become effective for fiscal quarters
beginning  after  June  15, 2000. SFAS No. 133 requires an entity to reflect all
derivative  instruments  on its balance sheet as assets or liabilities, based on
the  fair value of the instruments. The adoption of SFAS No. 133 is not expected
to  have  a  significant  effect  on  the  Company's  financial  statements.

RECLASSIFICATION

Certain  amounts  in the prior years financial statements have been reclassified
to  conform  to  the  current  year  presentation.

NOTE  2.  ACQUISITIONS
----------------------

In  May  1997 the Company acquired all the outstanding stock of Advantage Dental
HealthPlans ("Advantage"), a privately-held managed dental care company based in
Fort  Lauderdale,  Florida.  The  total acquisition cost included $10 million of
consideration  for  the  stock,  plus  $2.3 million of assumed liabilities, less
$800,000 of cash acquired. The $10 million purchase price was financed primarily
through an $8.5 million note payable to the seller. The acquisition was recorded
based  on  the  purchase  method  of accounting, and accordingly, the results of
operations  of  Advantage  are included in the accompanying financial statements
beginning  on  the  date of the acquisition. The total acquisition cost exceeded
the fair value of the net assets acquired by $9.2 million, which was recorded as
goodwill.

In  August 1997 the Company acquired all the outstanding stock of Consumers Life
Insurance  Company  of  North  Carolina  ("Consumers"),  a privately-held dental
insurance  company  with licenses in sixteen states. The total consideration for
the  stock  was $3.2 million. The acquisition was recorded based on the purchase
method  of  accounting,  and accordingly, the results of operations of Consumers
are  included  in the accompanying financial statements beginning on the date of
the  acquisition.


                                      F-9
<PAGE>
NOTE  3.  DISCONTINUED  OPERATIONS
----------------------------------

SALE  OF  DISCONTINUED  OPERATIONS

In  October  1996  the  Company  implemented a strategic plan to sell all of the
general  dental  practices  owned  by  the  Company.  Four of the general dental
practices  were  sold  during 1996, and the remaining practices were sold during
the  first  nine months of 1997. The assets of the general dental practices sold
consisted  primarily  of  accounts receivable, supply inventories, equipment and
leasehold  improvements. The Company provided certain administrative services to
the  purchasers  of  some  of  the  practices  until  1998,  when  the  Company
discontinued  the  provision  of  these  services.

On  February  26,  1998,  the  Company  announced  the  discontinuance  of  its
orthodontic  practices.  In  April  1998 the Company sold all of its orthodontic
practices  in  a  single  transaction  for  consideration  consisting of a $15.0
million  30-year  promissory  note,  which  was secured by all the assets of the
purchasers,  including  the  assets  sold  in the transaction. The assets of the
orthodontic  practices  sold  consisted primarily of accounts receivable, supply
inventory,  leasehold  improvements  and  dental  equipment.

The  operating  results of the discontinued dental and orthodontic practices are
included  in  the  accompanying  consolidated  statement of operations under the
caption  "Loss  from  operations  to  be  disposed  of."  Net  revenue  of  the
discontinued  operations,  which  is  reflected  under  the  caption  "Loss from
operations  to  be  disposed  of," was $1.9 million and $12.8 million during the
years  ended  December  31,  1998  and  1997,  respectively.

ACCOUNTING  TREATMENT  OF  CERTAIN  SALE  TRANSACTIONS

Several  of  the  discontinued  dental practices were sold to a single purchaser
(the  "Purchaser")  during the three months ended September 30, 1997 in exchange
for  $8.0  million of long-term promissory notes. In April 1998 the Company sold
all  of its orthodontic practices to the Purchaser in exchange for $15.0 million
of long-term promissory notes. During 1997 and 1998, the entities that purchased
four other general dental practices from the Company conveyed those practices to
the  Purchaser  in  exchange  for the assumption of the related promissory notes
payable to the Company. At the time of the conveyances of these practices to the
Purchaser,  the  related promissory notes had an aggregate outstanding principal
balance  of  $1.9  million.  During 1997 and 1998, the Company loaned a total of
$1.6  million  to  the Purchaser, which was used for working capital purposes by
the  Purchaser.

Because  management  concluded  that  the  Purchaser  did  not  have  sufficient
resources  to  repay the promissory notes from sources other than the operations
of the purchased practices, the Company did not treat the sale transactions with
the  Purchaser  as  sales  for  accounting  purposes.  Accordingly,  the related
promissory  notes  and  the  working  capital  loans  are  not  reflected in the
accompanying  financial  statements.  Instead,  the  historical  cost of the net
assets  of  the  related  general  dental  and  orthodontic  practices, less the
interest  payments  received  from  the Purchaser, is reflected on the Company's
balance  sheet  under the caption "Assets of discontinued operations transferred
under  contractual  arrangements."  The  Company's  financial  statements do not
reflect  any  gains  on these sale transactions, and do not reflect any interest
income  on  the related promissory notes. In addition, the carrying value of the
promissory  notes  related  to  the  four practices that were transferred to the
Purchaser  was  reduced  to the historical cost of the net assets of the related
dental  practices.  This  reduction  is  included in "Loss from operations to be
disposed of" on the accompanying statements of operations. These assets are also
reflected  on  the  Company's  balance  sheet  under  the  caption  "Assets  of
discontinued operations transferred under contractual arrangements." The working
capital loans were treated as expenses at the time the loans were made, which is
included  in  "Loss  from  operations  to  be  disposed  of" on the accompanying
statements  of operations. This accounting treatment more appropriately reflects
the  economic  substance of the transactions, as distinct from the legal form of
the  transactions.  An  impairment  charge  was recognized in 1999 (see Note 6).

NOTE  4.  INVESTMENTS
---------------------

In  accordance with SFAS No. 115, Accounting for Certain Investments in Debt and
Equity  Securities,  the  Company  has  classified its investment portfolio into
"available-for-sale"  and  "held-to-maturity" categories. Investments classified
as available-for-sale are carried at fair value and unrealized gains and losses,
net  of  applicable  income  taxes,  are  reported  in  a  separate  caption  of
stockholders'  equity. Investments classified as held-to-maturity are carried at
amortized  cost.  At December 31, 1999, the Company had net unrealized losses of
$18,000,  which  is  reflected  in  stockholders'  equity  under  the  caption
"Accumulated  other  comprehensive  income  (loss)."

Gross  realized  gains  on  sales  of  investment  securities  were  $2,051,000,
$815,000,  and  $155,000  for  the years ended December 31, 1999, 1998 and 1997,
respectively.  Gross  realized  losses  on  sales  of investment securities were
$851,000,  $1,225,000,  and $173,000 for the years ended December 31, 1999, 1998
and  1997, respectively. The historical cost of specific securities sold is used
to  compute  the  gain  or  loss  on  the  sale  of  investments.


                                      F-10
<PAGE>
During  1998  the  Company transferred approximately $4.2 million of securities,
representing  all of its held-to-maturity investments, to the available-for-sale
category.  This  amount  represented the amortized cost of the securities at the
date of transfer. The estimated fair value of those securities was approximately
$4.4  million, resulting in a net unrealized gain of $0.1 million (net of tax of
$0.1  million),  which  was  reflected  as  an  increase  in  "Accumulated other
comprehensive  income (loss)." This change in classification was due to a change
in management's intent with respect to these securities. Due to operating losses
during  1998,  which  were  not anticipated when the investments were purchased,
management  determined  that  the  Company  needed the flexibility to respond to
changes  in  interest rates and to take advantage of changes in the availability
of  and  the  yield on alternative investments. Therefore, the classification of
these  securities  was  changed  to  available-for-sale.

The  Company's  investments  as  of  December  31, 1999 are summarized below (in
thousands).  The  estimated  fair value of investments is based on quoted market
prices.

<TABLE>
<CAPTION>
                                       COST/        GROSS        GROSS      ESTIMATED
                                     AMORTIZED   UNREALIZED    UNREALIZED      FAIR
                                        COST        GAINS        LOSSES       VALUE
                                     ----------  -----------  ------------  ----------
<S>                                  <C>         <C>          <C>           <C>

Classified as available-for-sale:
  U.S. government and its agencies   $    5,489  $        --  $       (31)  $    5,458
  State obligations                         541            5           --          546
  Municipal obligations                     448            7           --          455
  Mutual funds and other                    510            1           --          511
                                     ----------  -----------  ------------  ----------

    Total available-for-sale         $    6,988  $        13  $       (31)  $    6,970
                                     ==========  ===========  ============  ==========
</TABLE>

The  maturity  dates  of  the Company's investments as of December 31, 1999, are
summarized  below  (in  thousands):

<TABLE>
<CAPTION>
                                     COST/
                                   AMORTIZED  ESTIMATED
                                      COST   FAIR VALUE
                                     ------  -----------
<S>                                  <C>     <C>
Classified as available-for-sale:
  Due in 2000                        $3,923  $     3,919
  Due in 2001 through 2004            2,350        2,322
  Due in 2005 through 2009              623          632
  Due after 2009                         92           97
                                     ------  -----------

    Total available-for-sale         $6,988  $     6,970
                                     ======  ===========

</TABLE>

The  Company's  investments  as  of  December  31, 1998 are summarized below (in
thousands).  The  estimated  fair value of investments is based on quoted market
prices.

<TABLE>
<CAPTION>
                                       COST/        GROSS        GROSS      ESTIMATED
                                     AMORTIZED   UNREALIZED    UNREALIZED      FAIR
                                        COST        GAINS        LOSSES       VALUE
                                     ----------  -----------  ------------  ----------
<S>                                  <C>         <C>          <C>           <C>
Classified as available-for-sale:
  U.S. government and its agencies   $    3,538  $       100  $        --   $    3,638
  State obligations                         674           32           --          706
  Corporate bonds                           376           --          (57)         319
  Equity securities                       2,715           --         (665)       2,050
  Municipal obligations                     448           23           --          471
                                     ----------  -----------  ------------  ----------

    Total available-for-sale         $    7,751  $       155  $      (722)  $    7,184
                                     ==========  ===========  ============  ==========
</TABLE>


                                      F-11
<PAGE>
NOTE  5.  PROPERTY  AND  EQUIPMENT
----------------------------------

Property  and  equipment  is recorded at cost. Depreciation and amortization are
calculated using the straight-line method over the estimated useful lives of the
assets as follows: buildings - 30 years; leasehold improvements - 5 to 25 years;
furniture, fixtures and other equipment - 3 to 10 years. The cost of maintenance
and  repairs is expensed as incurred, while significant improvements that extend
the  estimated  useful  life of an asset are capitalized. Upon the sale or other
retirement  of  assets,  the cost of any such assets and the related accumulated
depreciation  are  removed  from  the  books  and  any resulting gain or loss is
recognized.  The  Company's property and equipment consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31,    DECEMBER 31,
                                                                1999            1998
                                                           --------------  --------------
<S>                                                        <C>             <C>
Buildings and improvements                                 $         165   $         165
Leasehold improvements                                               860             520
Furniture, fixtures and other equipment                           10,000           9,203
                                                           --------------  --------------
  Total, at cost                                                  11,025           9,888
Less - accumulated depreciation and amortization                  (6,209)         (3,783)
                                                           --------------  --------------

  Total, net of accumulated depreciation and amortization  $       4,816   $       6,105
                                                           ==============  ==============
</TABLE>


NOTE  6.  IMPAIRMENT  OF  ASSETS
--------------------------------

INTANGIBLE  ASSETS

Management  reviews  for  impairment  of  intangible assets that are used in the
Company's   operations  on  a  periodic  basis  in  accordance  with  accounting
Principles Board Opinion No.17 ("APB No.17"). Management deems a group of assets
to be  impaired if  estimated  discounted  future cash  flows  are less than the
carrying amount of the assets. Estimates  of  future  cash  flows  are  based on
management's best estimates of anticipated  operating results over the remaining
useful life of the assets.

During 1999, the Company recognized impairment losses of $24.6 million based on
estimated discounted cash flows to  be  generated  by  each  of  the  Company's
intangible  assets.   The  impairment  was  recognized  for  the  goodwill  and
non-compete  covenant  related  to the  acquisition  of  First  American Dental
Benefits,  Inc.  in  September   1996  ( $14.7  million ),  the  goodwill   and
non-compete  covenant  related  to  the  acquisition  of  Advantage in May 1997
($9.3 million),  and the  insurance  license  acquisition  costs related to the
acquisitions  of  two  insurance  companies  in 1997  and 1992 ($0.6  million).


                                      F-12
<PAGE>
ASSETS  OF  DISCONTINUED  OPERATIONS  TRANSFERRED UNDER CONTRACTUAL ARRANGEMENTS

"Assets  of  discontinued operations transferred under contractual arrangements"
consists  of  the  historical  cost  of the net assets of certain general dental
practices  and  certain  orthodontic  practices that were sold by the Company in
1998  and  1997 (see Note 3). During 1999, the Company reached an oral agreement
with  the purchaser of those practices (the "Purchaser") and another third party
(the  "New  Purchaser"), under which the related promissory notes payable to the
Company  (the "Notes") would be liquidated.  Under this agreement, the Purchaser
would  convey  the dental and orthodontic practices that comprise the collateral
for  the Notes to the New Purchaser, in exchange for proceeds that would be paid
to  the  Company  in  satisfaction  of  the Notes.  Based on this agreement, the
Company recorded a $4.4 million charge to earnings (net of income tax benefit of
$2.1  million)   during 1999,  to  reduce  the  carrying  value  of  "Assets  of
discontinued  operations transferred under contractual  arrangements"  to  their
estimated  realizable value.  During  March 2000  the  Company  entered  into  a
definitive agreement  with  respect  to  this transaction,  which  is  currently
pending regulatory  approval.

NOTES  RECEIVABLE

During  the  fourth  quarter  of  1998,  the  Company, in an effort to liquidate
assets,  offered  to  reduce  the principal amount of the notes due from certain
parties to whom it had sold dental practices (other than the Purchaser discussed
in  Note  3)  in exchange for current cash payment in satisfaction of the notes.
Accordingly, the Company provided a reserve of $1.8 million at December 31, 1998
to  reflect  the  impact  of  its decision to actively pursue liquidation of the
notes  receivable.

REAL  ESTATE

During  the third quarter of 1998, the Company moved its corporate office from a
building  owned  by the Company in Anaheim, California to leased office space in
Aliso  Viejo,  California. As a result, the Company made the decision in 1998 to
sell  the Anaheim building and certain other assets related to it, including the
land  and  various  building improvements. During the first quarter of 1999, the
Company  received  a  written  offer  to purchase these assets from the Company.
Based  on  this  offer, and as required by SFAS No. 121, the Company recorded an
impairment  loss  of  $569,000, and accrued closing expenses of $188,000, in the
fourth  quarter  of  1998. The book value of the building and related assets was
$3.6  million  at  December  31,  1998,  which  is reflected on the accompanying
balance sheet under the caption "Assets held for sale." In May 1999, the Company
sold  the  building  for  $3.5  million,  including  $3.0  million in cash and a
promissory  note  for  $500,000.  The  promissory  note  bears  interest at 10%,
requires  monthly  interest  payments,  and  matures  in  May  2000.

NOTE  7.  CLAIMS  PAYABLE  AND  CLAIMS  INCURRED  BUT  NOT  REPORTED
--------------------------------------------------------------------

The  Company is responsible for paying claims submitted by dentists for services
provided to patients who have purchased dental coverage from the Company. Claims
payable  consists  of  claims  submitted by the dentists but not yet paid by the
Company.  Claims  incurred  but  not  reported is an estimate of the claims that
were  incurred  prior  to  the  balance  sheet date, but which have not yet been
submitted  to  the  Company as of the balance sheet date. The estimate of claims
incurred  but not reported is based primarily on the average historical lag time
between  the  date of service and the date the related claim is submitted to the
Company,  as well as the recent trend in the aggregate amount of incurred claims
per covered individual. Since the liability for incurred but not reported claims
is  necessarily an actuarial estimate, the amount of claims eventually submitted
for services provided prior to the balance sheet date could differ significantly
from  the  estimated  liability.

Indemnity claims are related to services delivered to individuals covered by the
Company's  indemnity  insurance plans. Specialist referral claims are related to
specialist  services  delivered  to individuals covered by the Company's managed
care  plans.  Supplemental  claims  are  related to primary care dental services
delivered  to  individuals  covered  by  the  Company's  managed care plans. The
activity  in the liability for each type of claim is shown below (in thousands).
The  activity  in  the liability for supplemental payments is not shown for 1998
and  1997  because  it  was  not  material  in  those  years.


                                      F-13
<PAGE>
<TABLE>
<CAPTION>
                                         SPECIALIST
                                INDEMNITY  REFERRAL SUPPLEMENTAL
                                 CLAIMS     CLAIMS    PAYMENTS     TOTAL
                                ---------  --------  ----------  ---------
<S>                             <C>        <C>       <C>         <C>
  Balance at January 1, 1997    $  2,120   $ 1,010               $  3,130

  Incurred claims related to:
    Current year - 1997           18,100     8,126                 26,226
    Prior years                      (13)      (22)                   (35)
  Paid claims related to:
    Current year - 1997          (15,950)   (6,645)               (22,595)
    Prior years                   (2,107)     (988)                (3,095)
                                ---------  --------              ---------

  Balance at December 31, 1997     2,150     1,481                  3,631

  Incurred claims related to:
    Current year - 1998           16,909     7,251                 24,160
    Prior years                      794      (338)                   456
  Paid claims related to:
    Current year - 1998          (14,636)   (5,966)               (20,602)
    Prior years                   (2,944)   (1,143)                (4,087)
                                ---------  --------              ---------

  Balance at December 31, 1998  $  2,273   $ 1,285               $  3,558
                                =========  ========              =========

  Balance at January 1, 1999    $  2,273   $ 1,285   $     400   $  3,958

  Incurred claims related to:
    Current year - 1999           18,722     8,292       6,730     33,744
    Prior years                      186      (517)         42       (289)
  Paid claims related to:
    Current year - 1999          (14,497)   (6,932)     (5,879)   (27,308)
    Prior years                   (2,459)     (767)       (442)    (3,668)
                                ---------  --------  ----------  ---------

  Balance at December 31, 1999  $  4,225   $ 1,361   $     851   $  6,437
                                =========  ========  ==========  =========
</TABLE>

The  liability  for  claims  payable  and  claims  incurred  but not reported is
adjusted each period to reflect any differences between claims actually paid and
previous estimates of the liability. During each of the years ended December 31,
1999,  1998,  and  1997,  the  adjustments  to  the  liability  to reflect these
differences,  which  are  reflected  in  the  above  table,  were  not material.

NOTE  8.  NOTES  PAYABLE  AND  LONG-TERM  DEBT
----------------------------------------------

Notes  payable  and  long-term  debt  consisted of the following (in thousands):

<TABLE>
<CAPTION>
                         DECEMBER 31,    DECEMBER 31,
                             1999            1998
                        --------------  --------------
<S>                     <C>             <C>
Bank line of credit     $       7,045   $       8,000
Senior notes payable           32,500          32,500
Other note payable                255           1,894
                        --------------  --------------
  Total debt                   39,800          42,394
Less - current portion           (255)         (9,894)
                        --------------  --------------

  Long-term debt        $      39,545   $      32,500
                        ==============  ==============
</TABLE>

In  September  1997  the  Company issued $32.5 million of unsecured senior notes
payable.  The senior notes are payable in annual installments of $6.5 million on
each  September  30,  beginning in 2001, with a final maturity date of September
30,  2005.  The  interest  rate  on the notes was fixed at 8.91% at December 31,
1999.


                                      F-14
<PAGE>
In  January 1998 the Company entered into an $8 million revolving line of credit
facility  with  a bank, under which $7.0 million was outstanding at December 31,
1999.  The  outstanding  balance under the credit facility is payable in full on
January 29, 2000. The interest rate on the facility as of December 31, 1999, was
equal to the bank's prime rate plus 3.0 % (11.0% at December 31, 1999). The loan
is  secured  by  all  assets of the Company, including accounts receivable, real
estate,  other  fixed  assets,  intangible  assets, and a negative pledge on the
stock  of  all  the  Company's  subsidiaries.

In  May 1999 the Company executed restructured credit agreements with respect to
both  the  senior  notes  payable and the revolving line of credit facility. The
restructured  agreements provide for changes in interest rates and modifications
to  the  financial  covenants  and  reporting  requirements, as well as required
principal  repayments.  In  connection  with  the  execution of the restructured
agreements, the Company obtained waivers for all prior and existing defaults and
events  of default under the previous credit agreements through May 28, 1999. In
connection  with  the  restructured  agreements,  the Company issued warrants to
purchase 382,000 shares of common stock for $4.51 per share to the holder of the
senior  notes  payable.  The  Company  estimated  that  the  fair value of these
warrants  was  $320,000,  based  on  an  option-pricing model. Accordingly, this
amount  was  charged  to  interest  expense and credited to stockholders' equity
during  1999.  The  warrants are exercisable at any time from January 1, 2000 to
December  31,  2003.  The  warrants  were  cancelled  in  connection  with  the
transaction  completed  on  March  1,  2000  (see  Note  14).

In  connection with the restructured senior notes payable and the revolving line
of  credit  facility,  the  Company  is  subject  to  various  loan  covenant
requirements.  The  Company  was not in compliance with those requirements as of
December  31,  1999.  However,  the  outstanding balances under the senior notes
payable and the revolving line of credit facility are classified as long-term on
the accompanying consolidated balance sheet, due to the transaction completed on
March  1,  2000  (see  Note 14). The Company expects that all of the outstanding
debt  under  the  senior notes payable and the revolving credit facility will be
converted  to  convertible  preferred stock in 2000, pursuant to the transaction
discussed  in  Note  14.

NOTE  9.  INCOME  TAXES
-----------------------

The  Company's  accounting  for income taxes is in accordance with SFAS No. 109,
Accounting  for  Income Taxes. SFAS No. 109 requires the recognition of deferred
tax  liabilities  and  assets for the expected future tax consequences of events
that  have been recognized in the Company's financial statements or tax returns.
The  measurement of deferred tax liabilities and assets is based on existing tax
laws.  SFAS  No.  109  also  requires  an entity to record a valuation allowance
related  to  deferred  tax assets in the event that available evidence indicates
that  the  future  tax  benefits  related  to the deferred tax assets may not be
realized. A valuation allowance is required when it is more likely than not that
the  deferred  tax  assets  will  not  be  realized.

The  Company's  federal and state income tax expense (benefit) is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                 YEAR  ENDED  DECEMBER  31,
                                                                ----------------------------
                                                                  1999      1998      1997
                                                                --------  --------  --------
<S>                                                             <C>       <C>       <C>
    Income tax expense (benefit) from continuing operations:
          Currently payable -  Federal                          $   648   $   (31)  $ 1,585
          State                                                     358        11       407
     Deferred - Federal                                           6,613    (2,667)     (483)
          State                                                   3,318      (719)     (138)
                                                                --------  --------  --------
    Income tax expense (benefit) from continuing operations      10,934    (3,406)    1,371
    Income tax expense (benefit) from discontinued operations    (2,087)   (1,554)   (4,547)
                                                                --------  --------  --------

          Total income tax expense (benefit)                    $ 8,847   $(4,960)  $(3,176)
                                                                ========  ========  ========
</TABLE>


                                      F-15
<PAGE>
A  reconciliation  of the expected federal income tax expense (benefit) based on
the  statutory rate to the actual income tax expense (benefit) on  income (loss)
from continuing operations is as follows (in thousands):

<TABLE>
<CAPTION>
                                                        YEAR  ENDED  DECEMBER  31,
                                        ------------------------------------------------------
                                               1999               1998               1997
                                        ------------------  -----------------  ---------------
                                         AMOUNT       %      AMOUNT      %      AMOUNT     %
                                        ---------  -------  --------  -------  --------  -----
<S>                                     <C>        <C>      <C>       <C>      <C>       <C>
  Expected federal income tax
    expense (benefit)                   $(12,491)  (34.0)%  $(3,820)  (35.0)%  $ 1,047   35.0%
  State income tax expense (benefit),
    net of effect on federal tax           1,903      5.2      (497)    (4.5)      158    5.3
  Tax-exempt income                          (17)    (0.1)      (19)    (0.2)      (35)  (1.2)
  Goodwill and impairments                 8,190     22.3       254      2.3       186    6.2
  Transaction loss                            --       --       670      6.1        --     --
  Other                                      468      1.3         6      0.1        15    0.5
  Valuation allowance                     12,881     35.1        --       --        --     --
                                        ---------  -------  --------  -------  --------  -----
    Actual income tax
      expense (benefit)                 $ 10,934     29.8%  $(3,406)  (31.2)%  $ 1,371   45.8%
                                        =========  =======  ========  =======  ========  =====
</TABLE>


Deferred  tax  assets  are  related  to  the  following  (in  thousands):

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                        ------------------
                                                          1999      1998
                                                        ---------  -------
<S>                                                     <C>        <C>
Current deferred tax assets (liabilities):
  Claims payable and incurred but not reported claims   $     --   $  459
  State income taxes                                         (18)    (501)
  Amortization of prepaid expense                           (188)     (23)
  Accrued expenses                                           429       --
  Other                                                      279      132
                                                        ---------  -------
  Total current deferred tax assets                          502       67
  Valuation allowance                                       (502)      --
                                                        ---------  -------

    Net current deferred tax assets                     $     --   $   67
                                                        =========  =======

Long-term deferred tax assets (liabilities):
  Reserve for revenue adjustments and note impairment   $  2,683   $1,697
  Net operating loss carry-forward                         4,994    2,253
  Gain on sale of dental offices                           6,696    5,200
  Depreciation and amortization                            2,373     (875)
  Other                                                       18      140
                                                        ---------  -------
  Total long-term deferred tax assets                     16,764    8,415
  Valuation allowance                                    (16,764)      --
                                                        ---------  -------

    Net current deferred tax assets                     $     --   $8,415
                                                        =========  =======
</TABLE>

During  1999  the Company recorded a charge to earnings to establish a valuation
allowance against its deferred tax assets.  The amount of the allowance is equal
to  the  total  amount  of  its  deferred tax assets, which was $17.3 million at
December  31,  1999.  The Company's deferred tax assets have been fully reserved
due  to uncertainty about whether they will be realized in the future, primarily
due  to  operating  losses  incurred  by  the  Company  in 1998 and 1999 and the
existence  of  significant net operating loss carry-forwards. As of December 31,
1999,  the  Company  had net operating loss carry-forwards for federal and state
tax  purposes  of  approximately  $12.5 million and $8.2 million, which begin to
expire  in  2018  and  2003,  respectively.


                                      F-16
<PAGE>
NOTE  10.  COMMITMENTS  AND  CONTINGENCIES
------------------------------------------

LEASE  COMMITMENTS

The  Company  leases  several  administrative  offices,  computer  equipment and
furniture  under  operating  leases. Rental expense under these operating leases
was $3,823,000, $1,501,000, and $1,217,000 in 1999, 1998 and 1997, respectively.
Future  minimum  rental  payments required under non-cancelable operating leases
with  a  remaining  term  in  excess of one year as of December 31, 1999, are as
follows  (in  thousands):

            YEAR ENDING
            DECEMBER 31,        AMOUNT
          ----------------  -------------

          2000              $       3,811
          2001                      2,907
          2002                      2,719
          2003                      2,341
          2004                      1,983
       Thereafter                   4,289

EMPLOYMENT  AGREEMENT  COMMITMENTS

The  Company  has  employment  agreements with certain executive officers of the
Company.  Future  minimum  payments  under  these  employment  agreements are as
follows  (in  thousands):

            YEAR ENDING
            DECEMBER 31,        AMOUNT
          ----------------  -------------

          2000              $         528
          2001                        170

LITIGATION

The  Company  is a defendant in various lawsuits arising in the normal course of
business.  In  the  opinion  of  management,  the  ultimate  outcome of existing
litigation  will  not  have  a  material  effect  on  the Company's consolidated
financial  position  or  results  of operations. In December 1999, a shareholder
lawsuit  against  the  Company  was  filed,  which  alleges that the Company and
certain  of its officers violated certain securities laws by issuing a series of
alleged  false  and  misleading  statements  concerning  the  Company's publicly
reported  revenues and earnings during a specified class period. The Company has
directors and officers liability insurance and intends to vigorously defend this
litigation.  In the opinion of the Company's management, the ultimate outcome of
this  matter  will not have a material adverse effect on the Company's financial
position  or  results  of  operations.

CONTINGENT  LEASE  OBLIGATIONS

The  Company  sold  all  of  its  general  dental  practices and its orthodontic
practices during 1996, 1997 and 1998, as discussed in Note 3. In connection with
the  sale  of  those  practices, all the purchasers of those practices agreed to
make  all  the  remaining  lease  payments related to the dental offices used by
those  practices.  However, the Company remains secondarily liable for the lease
payments  in the event that the purchasers of those practices fail to make those
payments.  At  December  31,  1999,  the  aggregate  contingent liability of the
Company   related  to  all  of  these   leases  was  approximately   $8  million
over the terms of the various lease  agreements.  However,  as  of  December 31,
1999, management  has  not  been  notified of any defaults that would materially
affect the Company's financial position.

EMPLOYEE  RETIREMENT  PLAN

The  Company  maintains  a  retirement plan under Section 401(k) of the Internal
Revenue  Code  (the  "Plan").  Under  the  Plan, employees are permitted to make
contributions  to  a  retirement account through payroll deductions from pre-tax
earnings.  Employees  are  fully  vested  in  contributions  made  from  payroll
deductions.  In  addition,  the  Company may, at its discretion, make additional
contributions  to  the  Plan.  The  Company made no contributions to the Plan in
1999,  1998  or  1997.


                                      F-17
<PAGE>
BUSINESS  SEGMENT  INFORMATION

The  Company  is  engaged in the provision of dental benefit plans to employers,
associations  and individuals. The operation of the general dental practices and
the  orthodontic  practices  has been discontinued. The last of the discontinued
operations  were  divested  effective April 1, 1998. Following the April 1, 1998
divestiture, the Company's sole line of business is providing dental benefits to
employer  groups,  associations  and  individuals.

NOTE  11.  CAPITAL  STOCK
-------------------------

STOCK  REPURCHASES

As  of  December  31,  1999, the Company had 3,274,788 shares of treasury stock,
which  were acquired by the Company for an aggregate of $18.1 million. The board
of  directors  of  the  Company  has  authorized  management  to  repurchase  an
additional 691,800 shares of the Company's common stock in either open market or
private  transactions.

STOCK  OPTION  PLAN

The Company has a stock option plan (the "Plan") that authorizes the granting of
both  incentive  and  non-qualified  stock  options  to purchase an aggregate of
1,700,000  shares  of  common  stock.  Either  incentive  or non-qualified stock
options may be granted to executive officers and other employees of the Company.
As  of  December 31, 1999, all stock options granted to employees were incentive
stock  options.  Non-qualified  stock  options  may  be  granted to non-employee
directors of the Company. Under the Plan, the exercise price of any stock option
granted must be at least equal to the market value of the Company's common stock
on  the date the option is granted. The Plan is administered by the Compensation
and  Stock  Option  Committee  of  the  board  of  directors  of  the  Company.

SFAS  No. 123, Accounting for Stock-Based Compensation, provides a choice of two
different methods of accounting for stock options granted to employees. SFAS No.
123 encourages, but does not require, entities to recognize compensation expense
equal  to the fair value of employee stock options granted. Under this method of
accounting,  the fair value of a stock option is measured at the grant date, and
compensation expense is recognized over period in which the stock option becomes
exercisable.  Alternatively,  an  entity may choose to use the accounting method
described  in  Accounting  Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB No. 25"). Under APB No. 25, no compensation expense is
recognized  as long as the exercise price of each stock option is at least equal
to  the  market  price  of  the underlying stock at the time of the grant. If an
entity  chooses  to  use the accounting method described in APB No. 25, SFAS No.
123  requires  that  the  pro  forma  effect  of  using the fair value method of
accounting on its net income be disclosed in a note to the financial statements.
The  Company  has  chosen  to use the accounting method described in APB No. 25.

The  following  is  a  summary  of  activity  in  stock  options:


<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          1999       1998      1997
                                                        ---------  --------  ---------
<S>                                                     <C>        <C>       <C>
Outstanding at beginning of year                         769,800   638,017    510,817
Stock options granted                                     55,000   184,000    168,000
Stock options exercised                                       --        --    (30,666)
Stock options canceled                                   (69,500)  (52,217)   (10,134)
                                                        ---------  --------  ---------

Outstanding at end of year                               755,300   769,800    638,017
                                                        =========  ========  =========

Exercisable at end of year                               551,000   455,066    363,228

Weighted average exercise price of options granted      $   3.72   $  9.11  $    12.59
Weighted average exercise price of options exercised          --        --       4.35
Weighted average exercise price of options canceled        12.70     12.45      14.59
Weighted average exercise price of options outstanding      9.88     10.58      11.13
Weighted average exercise price of options exercisable     10.39     10.10       9.17
</TABLE>


                                      F-18
<PAGE>
The  following  is  a summary of stock options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
   RANGE OF         OPTIONS       WEIGHTED        WEIGHTED       SHARES       WEIGHTED
   EXERCISE       OUTSTANDING      AVERAGE         AVERAGE     EXERCISABLE    AVERAGE
    PRICE          12/31/99     REMAINING LIFE  EXERCISE PRICE  12/31/99   EXERCISE PRICE
---------------  ------------  ---------------  --------------  ---------  ---------------
<S>              <C>           <C>              <C>             <C>        <C>
$  3.44 - 5.00        196,000       4.01        $         4.38    130,333         $ 4.61
   7.25 - 10.04       216,000       6.94                  9.53    123,333           9.48
  10.25 - 13.06       226,900       5.98                 11.29    189,267          11.19
  15.75 - 15.75        50,400       6.22                 15.75     50,400          15.75
  17.33 - 20.75        66,000       6.67                 18.08     57,667          18.09
                    ---------                                    --------
    Total             755,300       5.80        $         9.88    551,000  $       10.39
                 ============                                   =========
</TABLE>

The  weighted average fair value of stock options granted during 1999, 1998, and
1997,  was  $2.73,  $5.93, and $4.56 per share, respectively. In accordance with
SFAS  No.  123, the following table shows the pro forma effect of using the fair
value method of accounting for stock options (in thousands, except for per share
amounts):

<TABLE>
<CAPTION>
                                   YEAR ENDED DECEMBER 31,
                               ------------------------------
                                 1999       1998       1997
                               ---------  ---------  --------
<S>                            <C>        <C>        <C>
  Net loss, as reported        $(52,036)  $ (9,938)  $(5,493)
  Pro forma net loss            (52,360)   (10,325)   (5,846)

  Loss per share, as reported    (10.96)     (2.09)    (1.12)
  Pro forma loss per share       (11.03)     (2.18)    (1.19)
</TABLE>

SFAS  No. 123 requires a public entity to estimate the fair value of stock-based
compensation  by  using  an option-pricing model that takes into account certain
facts and assumptions. The facts and assumptions that must be taken into account
are  the  exercise  price,  the  expected  life of the option, the current stock
price, the expected volatility of the stock price, the expected dividends on the
stock,  and the risk-free interest rate. The option-pricing models commonly used
were developed to estimate the fair value of freely tradable, fully transferable
options  without vesting restrictions, which significantly differ from the stock
options  granted  by  the  Company. The Company estimated the fair value of each
stock  option  as of the date of grant by using the Black-Scholes option-pricing
model.  The  facts  and  assumptions  used  to determine the fair value of stock
options granted were an average expected life of four years, expected volatility
of  97%  in  1999,  50%  in  1998, and 38% in 1997, no expected dividends, and a
risk-free  interest  rate  of  approximately  6%.  The assumptions regarding the
expected  life of the options and the expected volatility of the stock price are
subjective,  and  these  assumptions  greatly  affect  the  estimated fair value
amounts.

NOTE  12.  INVESTMENT  AND  OTHER  INCOME
-----------------------------------------

Investment  and  other  income  consists  of  the  following  (in  thousands):

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                      ------------------------
                                                       1999     1998    1997
                                                      -------  ------  -------
<S>                                                   <C>      <C>     <C>
  Net realized gains (losses) on sale of investments  $1,200   $(410)  $  (18)
  Interest income                                        932     268    1,326
  Other, net                                             (65)    766        8
                                                      -------  ------  -------

  Total investment and other income                   $2,067   $ 624   $1,316
                                                      =======  ======  =======
</TABLE>


                                      F-19
<PAGE>
Note13.  UNAUDITED  SELECTED  QUARTERLY  INFORMATION
----------------------------------------------------

RESTATEMENT

Subsequent  to  the  issuance  of  the  Company's  financial  statements for the
quarters  ended March 31, 1999 and June 30, 1999, the Company determined that it
had overstated its revenue and earnings for those two quarters, and that various
other  amounts  in  the  balance sheets  and  statements of operations including
accounts receivables, deferred income taxes,  and  deferred  revenue  as  stated
below required modification. As a  result,  the  financial  statements  for  the
quarters ended March 31, 1999, and June 30, 1999 have been restated to properly
state such amounts.  The  restated  amounts  are  reflected  in  the  unaudited
quarterly results of operations  shown  below.


                                      F-20
<PAGE>
QUARTERLY  RESULTS  OF  OPERATIONS

Unaudited  quarterly results of operations for the years ended December 31, 1999
and  1998  are  shown below (in thousands, except per share data). The unaudited
quarterly  results  should  be read in conjunction with the accompanying audited
financial  statements.

<TABLE>
<CAPTION>
                                                      MARCH  31,  1999          JUNE  30,  1999
                                                 ------------------------  ------------------------
                                                      AS                        AS
                                                  PREVIOUSLY       AS       PREVIOUSLY       AS
                                                   REPORTED     RESTATED     REPORTED     RESTATED
                                                 ------------  ----------  ------------  ----------
<S>                                              <C>           <C>         <C>           <C>
  Cash                                           $     1,251   $   1,553   $     3,085   $   3,508
  Investments available-for-sale                       2,774       2,774         2,715       2,715
  Accounts receivable                                  6,344       4,339         4,917       3,598
  Notes receivable                                    10,878          --         3,052          --
  Income taxes receivable                                 77         355         4,076       3,386
  Deferred income taxes                                6,447          67         6,478          67
  Assets held for sale                                 3,562       3,562            --          --
  Other current assets                                   747         658           653         508
                                                 ------------  ----------  ------------  ----------
    Total current assets                              32,080      13,308        24,976      13,782

  Property and equipment                               6,150       5,664         6,384       5,363
  Restricted cash and investments                      4,484       4,484         4,099       4,099
  Investments available-for-sale                       1,776       1,776         2,255       2,255
  Notes receivable                                     4,161       4,081         4,161       4,575
  Assets of discontinued operations
    transferred under contractual arrangements            --       8,950            --       3,599
  Intangible assets                                   31,370      31,361        30,932      31,885
  Deferred income taxes                                  539       8,189           539       8,220
  Other assets                                           240         286           237         284
                                                 ------------  ----------  ------------  ----------

    Total assets                                 $    80,800   $  78,099   $    73,583   $  74,062
                                                 ============  ==========  ============  ==========

  Accounts payable                               $    10,300   $   4,110   $    11,919   $   6,315
  Accrued expenses                                        --       6,151            --       5,766
  Short-term debt                                      9,695       9,695         7,598       7,598
  Income taxes payable                                   493          --            69          --
  Claims payable and claims incurred
    but not reported                                   3,858       4,104         4,224       4,715
  Deferred revenue                                       739       1,000         1,158       1,680
                                                 ------------  ----------  ------------  ----------
    Total current liabilities                         25,085      25,060        24,968      26,074

  Long-term debt                                      32,500      32,500        32,500      32,500
  Other long-term liabilities                            302       1,259           293       1,303

  Common stock                                        21,509      21,509        21,509      21,509
  Retained earnings                                   19,507      15,874        12,461      10,824
  Accumulated other comprehensive
    income (loss)                                         20          20           (25)        (25)
  Treasury stock, at cost                            (18,123)    (18,123)      (18,123)    (18,123)
                                                 ------------  ----------  ------------  ----------
    Total stockholders' equity                        22,913      19,280        15,822      14,185
                                                 ------------  ----------  ------------  ----------

    Total liabilities and stockholders' equity   $    80,800   $  78,099   $    73,583   $  74,062
                                                 ============  ==========  ============  ==========
</TABLE>


                                      F-21
<PAGE>
<TABLE>
<CAPTION>
                                                                                    1999
                                                 ------------------------------------------------------------------------
                                                       FIRST  QUARTER         SECOND  QUARTER
                                                 ------------------------  -----------------------
                                                      AS                        AS
                                                  PREVIOUSLY       AS       PREVIOUSLY       AS        THIRD     FOURTH
                                                   REPORTED     RESTATED     REPORTED     RESTATED    QUARTER    QUARTER
                                                 ------------  ----------  ------------  ----------  ---------  ---------
<S>                                              <C>           <C>         <C>           <C>         <C>        <C>
  Premium revenue                                $    24,755   $  23,863   $    25,050   $  23,989   $ 24,065   $ 24,308
  Health care services expense                        16,442      16,518        16,509      16,718     17,074     17,249
  Selling, general and administrative                  7,712       9,111         9,339       9,332     10,144      8,454
  Loss on impairment of
    assets                                                --          --            --          --     24,576         --
                                                 ------------  ----------  ------------  ----------  ---------  ---------

  Operating income (loss)                                601      (1,766)         (798)     (2,061)   (27,729)    (1,395)

  Investment and other income                          1,552       1,503           789         437       (147)       274
  Interest expense                                      (947)       (947)       (1,102)     (1,102)    (2,801)    (1,005)
  Loss on impairment of assets                            --          --       (10,355)         --         --         --
                                                 ------------  ----------  ------------  ----------  ---------  ---------

  Income (loss) before income taxes                    1,207      (1,210)      (11,466)     (2,726)   (30,677)    (2,126)
  Income tax expense (benefit)                           422        (350)       (4,420)       (940)     12,224         --
                                                 ------------  ----------  ------------  ----------  ---------  ---------

  Income (loss) before
    discontinued operations                              785        (860)       (7,046)     (1,786)   (42,901)    (2,126)
  Loss from operations to be disposed of                  --          --            --      (3,264)    (1,099)        --
                                                 ------------  ----------  ------------  ----------  ---------  ---------
  Net income (loss)                              $       785   $    (860)  $    (7,046)  $  (5,050)  $(44,000)  $ (2,126)
                                                 ============  ==========  ============  ==========  =========  =========

  Basic and diluted earnings (loss) per share:
    Income (loss) from continuing
      operations                                 $      0.17   $   (0.18)  $     (1.48)  $   (0.38)  $  (9.04)  $  (0.45)
  Income (loss) from discontinued
    operations                                            --          --            --       (0.69)     (0.23)        --
                                                 ------------  ----------  ------------  ----------  ---------  ---------

  Net income (loss)                              $      0.17   $   (0.18)  $     (1.48)  $   (1.07)  $  (9.27)  $  (0.45)
                                                 ============  ==========  ============  ==========  =========  =========

  Weighted average basic shares
    outstanding                                        4,747       4,747         4,747       4,747      4,747      4,747
</TABLE>


                                      F-22
<PAGE>
<TABLE>
<CAPTION>
                                                           1998
                                        ------------------------------------------
                                          FIRST     SECOND      THIRD     FOURTH
                                         QUARTER    QUARTER    QUARTER    QUARTER
                                        ---------  ---------  ---------  ---------
<S>                                     <C>        <C>        <C>        <C>


  Premium revenue                       $ 24,396   $ 24,440   $ 23,504   $ 25,109
  Health care services expense            16,431     16,288     16,539     16,762
  Selling, general and administrative      7,300      7,172      7,920     13,867
                                        ---------  ---------  ---------  ---------

    Operating income (loss)                  665        980       (955)    (5,520)

  Investment and other income                766        (35)      (948)       841
  Interest expense                          (922)      (973)    (1,020)    (1,396)
  Loss on impairment of assets                --         --         --     (2,397)
                                        ---------  ---------  ---------  ---------

    Income (loss) before income taxes        509        (28)    (2,923)    (8,472)
  Income tax expense (benefit)               233         25       (988)    (2,676)
                                        ---------  ---------  ---------  ---------

    Income (loss) before
      discontinued operations                276        (53)    (1,935)    (5,796)
  Income (loss) from discontinued
  operations                                (742)    (1,566)      (122)        --
  Income (loss) on disposal of
    orthodontic and dental practices          --         --         --         --
                                        ---------  ---------  ---------  ---------

    Net income (loss)                   $   (466)  $ (1,619)  $ (2,057)  $ (5,796)
                                        =========  =========  =========  =========

  Basic earnings (loss) per share:
    Income (loss) from continuing
      operations                        $   0.06   $  (0.01)  $  (0.41)  $  (1.22)
  Income (loss) from discontinued
    operations                             (0.16)     (0.33)     (0.02)        --
                                        ---------  ---------  ---------  ---------

    Net income (loss)                   $  (0.10)  $  (0.34)  $  (0.43)  $  (1.22)
                                        =========  =========  =========  =========

  Weighted average basic shares
    outstanding                            4,747      4,747      4,747      4,747

  Diluted earnings (loss) per share:
    Income (loss) from continuing
      operations                        $   0.06   $  (0.01)  $  (0.41)  $  (1.22)
  Income (loss) from discontinued
    operations                             (0.16)     (0.33)     (0.02)        --
                                        ---------  ---------  ---------  ---------

    Net income (loss)                   $  (0.10)  $  (0.34)  $  (0.43)  $  (1.22)
                                        =========  =========  =========  =========

  Weighted average diluted shares
    outstanding                            4,820      4,747      4,747      4,747
</TABLE>


FOURTH  QUARTER  ADJUSTMENTS

During  the  fourth  quarter  of  1998, the Company determined that certain aged
accounts  receivable  balances  were uncollectible, and accordingly, recorded an
$3.5  million  increase in its reserves for doubtful accounts during the quarter
ended  December  31,  1998.


                                      F-23
<PAGE>
RECLASSIFICATIONS

Certain  amounts  in  the  financial statements for the quarters ended March 31,
1999  and  June  30,  1999 have been reclassified to conform to the presentation
used  in  the  financial  statements  for  the  year  ended  December  31, 1999.

NOTE  14.  SUBSEQUENT  EVENT
----------------------------

On  March  1, 2000, the Company entered into an agreement with an investor group
(the  "Investors"),  the  holder  of  the senior notes payable (the "Senior Note
Holder"),  and  its  revolving  line  of  credit lender (the "Bank"). Under this
agreement, the Investors loaned $8.0 million to the Company in the form of notes
payable  due April 30, 2001, which bear interest at 10% annually. The Investors,
the  Senior  Note  Holder,  and  the Bank agreed to convert the new $8.0 million
loan,  the  outstanding balance of $32.5 million under the senior notes payable,
and  the  outstanding balance of $7.0 million under the revolving line of credit
to  convertible  preferred  stock,  subject  to  regulatory approval. Under this
agreement,  both  the  Senior  Note  Holder and the Bank agreed not to demand or
accept  any payment under the credit agreements, and not to take any enforcement
actions  of  any  kind  under  the  agreements  until  April  30,  2001.

The  convertible  preferred  stock  would  not accrue dividends of any kind, and
would  be  convertible  into  common  stock  at  the  option  of the holder. The
convertible  preferred stock would entitle the holder to one vote for each share
of  common  stock into which the preferred stock is convertible, with respect to
all  matters  voted on by the common stockholders of the Company. As a result of
this  transaction,  after  regulatory  approval  is  obtained,  the  existing
stockholders  of  the  Company  would  own approximately 14% of the common stock
interests  of the Company. Under this agreement, the Company agreed to place new
directors  on  its  board  of directors, who represent the Investors, the Senior
Note  Holder  and  the  Bank,  and  who  constitute  a  majority of the board of
directors.  The  conversion  of  the  Company's  outstanding debt to convertible
preferred  stock,  as described above, is currently pending regulatory approval.


                                      F-24
<PAGE>
<TABLE>
<CAPTION>
                   SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                                       SCHEDULE II
                            VALUATION AND QUALIFYING ACCOUNTS
                      YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                     (IN THOUSANDS)


                                 BALANCE AT CHARGED TO CHARGED TO              BALANCE AT
                                 BEGINNING  COST AND    OTHER                     END
                                  OF YEAR   EXPENSES   ACCOUNTS    WRITE-OFFS   OF YEAR
                                  --------  ---------  ---------  ------------  --------
<S>                               <C>       <C>        <C>        <C>           <C>
YEAR ENDED DECEMBER 31, 1997:

Allowance for doubtful accounts:
  Accounts receivable             $    531  $   1,058  $      --  $      (528)  $  1,061

  Long-term notes receivable      $     --  $   2,205  $      --  $        --   $  2,205

YEAR ENDED DECEMBER 31, 1998:

Allowance for doubtful accounts:
  Accounts receivable             $  1,061  $   1,733  $      --  $      (851)  $  1,942

  Long-term notes receivable      $  2,205  $     833  $      --  $    (1,018)  $  2,020

YEAR ENDED DECEMBER 31, 1999:

Allowance for doubtful accounts:
  Accounts receivable             $  1,942  $     481  $      --  $    (1,369)  $  1,054

  Long-term notes receivable      $  2,020  $   1,819  $      --  $        --   $  3,839
</TABLE>


                                      F-25
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